Is public investment in broadband premature?
Thursday 25 March 2010 18:30:15 by John Hunt

Large-scale investment in next-generation broadband could be premature according to an economist specialising in the impact of IT investment. Simon Hooton, of Regeneris Consulting claims that previous experience shows that there will be a rise in demand for high-speed broadband services which could stimulate the private sector to invest.

"It seems premature to rush into large-scale public investment when the scale of problems remains unclear and returns to the tax-payer are so uncertain. The current evidence on the economic impact of broadband is sketchy and requires further attention before we can be sure it will deliver the volumes of jobs and economic benefits that some are suggesting.

The government is keen to exploit efficiency savings through greater online provision of services. For many of these services, the current network would be sufficient, but they would help stimulate internet use among residential and businesses users which in turn would fuel demand for the faster connections.

Although there are some unique aspects of the UK's situation, the case that we are about to start rapidly losing economic ground if we do not commit ourselves to achieving 100 per cent coverage has not yet been convincingly made."

Simon Hooton, (Economist) Regeneris Consulting

While investing in terms of billions of public money now may be premature, the announced plans from Labour amount to only around £175 million being spent per year until 2017. The figures for the Conservatives spending are unknown, but public money would not be spent until 2012 at the earliest. The Conservative plans do intend to give the private sector some time to evolve their plans, and this may well help pin point where public sector investment is required.

The USC is an example of why we should NOT wait until the economic benefits are proved beyond doubt, since it has taken almost a year for the team tasked with implementing the USC to be formed. Waiting could mean significant economic harm to the UK economy, is that a gamble worth taking?

To date, none of the next-generation broadband solutions have solidly committed to 100% coverage. A recent Gordon Brown speech suggested 100% coverage by 2020, but it's worth remembering that we have seen Stephen Timms stand up and promise a USO (universal service obligation) only to be corrected later to be a USC (universal service commitment). Predicting what the Internet will be like in ten years is impossible, and helping to push forward plans to give everyone high-speed access is a sensible plan to ensure we are ready for what lies ahead.