Labour's broadband plan won't work - but let's have a national debate to find a plan that does
So, the Labour Party wants free full-fibre broadband for all, and to nationalise Openreach. Cue bedlam on social media as the telecoms industry slams the proposals and the Conservatives scream, “Marxism! State aid! Fantasy economics!”
There was more debate on Twitter alone about the UK’s national telecoms infrastructure in the 12 hours after Labour’s plan was announced, than there has been across the country for the last 12 years. Excellent – that can only be a good thing.
It’s incredibly unlikely Labour’s promise will be fulfilled, but they should be credited for sparking a discussion that should have taken place long time ago, about how to build a digital infrastructure for the 21st century. That doesn’t mean asking, how do we get better at what we already do? That’s the dull, repetitive conversation going on for the past 20 years. It means having a radical rethink of how to support a digital economy for the next 50 years.
But let’s just take a step back and look at some context. First, where we are now.
The UK could and, arguably, should already have a national full-fibre broadband network. That we don’t is down to a mix of Tory ideology, free-market capitalism and – counter-intuitively – a lack of competition in that free-market economy.
BT wanted to start building a fibre-optic network in the 1980s, but prime minister Margaret Thatcher wouldn’t let it happen, fearing that the investment required would prevent a competitive telecoms market developing after BT was privatised. As a result of that decision, a competitive telecoms market failed to develop for 20 years.
When genuine competition did come, it was only around consumer broadband and telephone services. If you didn’t want either from BT, you could go to Talk Talk, Sky or one of several smaller providers. Of course, you were still buying from BT, since most of those ISPs simply resold the BT network.
There was, briefly, a competitive market in cable telecoms, but that quickly consolidated into what is now Virgin Media.
BT was eventually dragged, kicking and screaming, into easing its near-monopoly through what was known as local loop unbundling – basically allowing other ISPs to install their own network equipment in BT telephone exchanges so they could control the “last mile” connectivity to individual premises. It was a big thing at the time, but it hasn’t really changed much.
The benefit from a consumer perspective was that you had lots of ISPs to buy your broadband from, depending on price and customer service (which remains highly variable).
But there remained zero competition at the heart of the telecoms industry – the bit that really matters for building a 21st century digital infrastructure – and that’s in the core network, known in the industry as the wholesale market. If you wanted to buy access to a national broadband network to sell services to consumers, you still had to go to BT. Virgin Media has resolutely avoided entering the wholesale market.
The UK limped along for years, with a structure that allowed for a constructed and heavily regulated form of competition at the consumer level, but an effective monopoly when it came to long-term investment in core infrastructure. It was simply too easy for BT to sweat its copper assets for as long as it could, and so that’s what it did.
Eventually, BT was dragged kicking and screaming (sound familiar?) into upgrading the local loop to deliver fibre to the street cabinet, without touching the copper last mile to the premises. This move only came about after years of regulatory pressure from Ofcom and the promise of government seed-funding for the hard to reach areas where BT said it wouldn’t be able to make a profit.
Today, we talk about moving to full-fibre broadband only because BT has been dragged kicking and screaming (anyone spot a pattern?) into installing fibre to the premises, thanks to pressure from Ofcom, government funding, and the growing influence of ISPs. All the while, BT shareholders have generally done very nicely thank you.
The only reason Labour can talk about nationalising Openreach, is because BT was dragged kicking and screaming (no!) into separating its local loop business into a standalone subsidiary, tasked with creating a level playing field for consumer services between all ISPs including BT.
So, with the exception of the Virgin Media network, we already have a monopoly local network infrastructure provider, that is owned by BT ultimately for the benefit of BT shareholders.
In the last five years, we’ve seen for the first time the emergence of alternative network providers, such as City Fibre and Hyperoptic, largely funded by private capital, which are targeting areas where BT has so far declined to invest in fibre.
So what does this all mean for Labour’s proposals?
For a start, Labour has massively underestimated the cost of nationalisation combined with offering free broadband for all. The National Infrastructure Commission has estimated a cost of about £33bn to build a nationwide full fibre network by the current target of 2033, which Openreach is largely funding itself. Of course, that funding assumes Openreach is still charging for broadband too – with no consumer broadband income, the overall costs would increase significantly.
Free broadband makes for good retail politics, so it’s likely to be popular on the doorstep, and ideologically pleasing to Labour’s base. But it’s very unlikely the proposals will happen. It would need Labour to win a significant majority in Parliament, for a start – which the polls suggest is unlikely. And it’s too controversial and costly to get through for a minority government.
But let’s not ignore it. Already the Labour plan has stimulated some fresh thinking – this blog post by the chief engineer at fibre installer Gigaclear, for example, which discusses an alternative model based around franchising that could deliver a basic free broadband service, a national infrastructure provider, and without having to nationalise Openreach. And here’s another, from former BCS policy director David Evans. There are other possibilities too, that are worth serious discussion without constant heckling from the “we can’t do that” brigade.
What about a minority public stake in Openreach, to use that investment to fund some form of basic free offering?
What are the economic opportunities and the potential for foreign investment in a country where every home and business has access to free internet?
What are the social benefits of such a move? More people working from home; better work/life balance; less commuting (thereby freeing up public funds otherwise needed for road and rail upgrades); less climate-harming long-distance travel thanks to video conferencing and online collaboration; more money going to the local high street because more people work at home; brownfield sites freed up for affordable housing because businesses don’t need so much office space. Maybe we could even scrap HS2 and use those funds to deliver free gigabit broadband to everyone?
If you put aside the current structure of the UK broadband sector, doesn’t the idea of a basic free broadband, from a national utility provider, seem like a sensible consideration if we want to be a global digital leader? It’s easy to say it can’t happen, but if we were starting from scratch, might that be seen as the right answer? Just because the UK has ended up with a messy and complicated broadband market doesn’t mean we have to stick with it to please vested interests, if we can yet build something better.
Labour’s broad and unspecific proposals also won’t work because they raise too many tricky questions, such as:
- What happens to Virgin Media and other ISPs, as well as the startup fibre builders? Most could be put out of business. Third-party investment in telecoms infrastructure would dry up.
- What about telephony? Currently, you can’t have BT broadband without a BT landline and phone service, when more and more people don’t use a landline. Would Labour nationalise the fixed-line phone service too?
- Where does the nationalised network begin and end? Openreach only looks after the last mile – the entire broadband network runs across BT’s core backbone network, which is also used as backhaul by mobile operators as well as thousands of corporates. Does that mean Labour’s British Broadband operator has to buy all its backhaul from the un-nationalised remnant of BT? Surely that’s a private sector monopoly?
- What about BT’s pension fund, which has been a huge financial drain on the telecoms giant for years? Would a Labour government have to take that on for all Openreach staff?
- Feel free to add your own.
In summary, Labour’s proposals won’t be implemented. But they do highlight the opportunity for a radical rethink of the UK’s telecoms infrastructure, and that’s a debate we should be having.
After all, when you think about it, and try to put politics aside, free basic fibre broadband for everyone is actually a pretty good idea. Let’s not dismiss it just because it doesn’t suit the way the industry works today.