The UK government could justify building a national point-to-point, fibre-to-the-home (FTTH) network if it saved just 0.5% of costs in each of the electricity, health, transport and education sectors, according to an OECD report.
Using a new calculation, the report argued for investment in a competitive, open-access national FTTH network based on achievable short-term benefits to the four sectors.
"On average, a cost savings of between 0.5% and 1.5% in each of the four sectors over 10 years resulting directly from the new broadband network platform could justify the cost of building [a national FTTH network]," the report said.
The authors said their calculations were rough estimates. "But they clearly highlight the fact that investments in fibre networks can be justified relatively easily through minimal cost savings in other sectors, even when the savings are often discounted in investment calculations by private firms."
Government investment in FTTH networks should avoid market distortions and crowding-out of private investment, they said. "The social returns could outweigh the costs of building the network, but private operators could not consider these in justifying their investments."
From a national point of view, this led to non-optimal provisioning of services that potentially limited innovation, they said.
The report said data networks were the foundation of new, smart electrical grids that would lead to lower fuel bills and emissions from power generation. They also opened the way to cheaper health care by remote monitoring and consultation of patients.
Broadband networks could also help optimise urban traffic flows by using real-time information to optimise routing. They also made it easier to provide learners and schools with better access to educational material and administrative services respectively.
The authors said they did not include the benefits high-speed networks could bring to the publishing and entertainment sectors, or the costs saved through centralised or cloud computing. "Spillovers in these sectors, which are not included in the calculations, could also help justify large investments in a national high-speed network," they said.
Policy makers should continue to promote private sector investment and competition to reduce the need for public funds for broadband projects.
"Governments should promote network technologies and topologies that are the most flexible, create the most opportunities for competition, offer the highest potential for innovation and those that can provide the most bandwidth in the future," the report said.
Bandwidth constraints should not inhibit innovation. Health applications would need very low latency and high quality of service guarantees, said the report. Other applications could require a dedicated second fibre to the household to work best.
"Symmetric bandwidth will be increasingly important," it said.
The authors said governments should consider setting up communications utilities that installed passive infrastructure, such as ducts and poles or dark fibre connections, to cover areas that were uneconomic for the private sector.
"A utility-style model may also require lower returns than a similar private investment, thus reducing costs and making roll-outs more economically feasible," they said.