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LSE report determines cost benefit case for rural areas is not strong
Monday 04 August 2014 17:00:33 by Andrew Ferguson

Good news if you own property in London that has good broadband as it seems to be the basic output from a London School of Economics and Imperial College London study is that you could see an 8% rise in the properties value.

The study looked at the effect of improving broadband speeds over time from 1995 to 2010 and the effect on how prices while trying to negate all the other variables that affect house pricing, though how it looked at broadband speeds in the years 1995 to 1998 is unclear, since ADSL only appeared in early 2000 and cable broadband started to roll-out a year or so before then.

For the richest people living in the most dense areas e.g. London house prices rose by 6% as ADSL (up to 8 Mbps services) and a further 2% when ADSL2+ was introduced. The average across England was 2.8% for ADSL, with a further 1% when ADSL2+ was rolled out. We do not know why the report ends in 2010, as 2009 when Virgin Media started ramping up broadband speeds significantly and the fibre roll-outs by Openreach started are what should really feed into the equation if the aim is to understand the costs and benefits for rolling out faster broadband.

"The average property price increased by 2.8% when going from a slow dial-up connection to the first generation of ADSL Internet connections, which allowed a speed of up to 8 Mbit/s. The price increased by an additional 1% when a newer technology, ADSL2+, was rolled out to offer Internet speeds up to 24 Mbit/s. We further decompose these average results by income and degree of urbanization. It turns out that the gains are very heterogeneous, and they are highest at the top of the distribution, among the richest people living in the most densely populated areas. An average property value in London increased by 6% with the introduction of ADSL, and by an extra 2% with ADSL2+. Endowed with these findings, we then evaluate the benefits of the EU Digital Targets for each LE in England, which we compare with available costs estimates. We find that increasing speed and connecting unserved households passes a cost-benefit test in urban and some suburban areas, while the case for universal delivery in rural areas is not as strong."

Extract from Spatial Economics Report

The ending of the data analysis in 2010, but citing surveys and other sources from 2012 onwards when the broadband landscape in the UK was undergoing massive changes tends to negate any use this report may have feeding into the Digital Agenda and any useful analysis beyond generating some exciting headlines. The report is restricted to England because they only had property data for England.

There is a possibility that the higher price performance in London if linked to broadband is down to the high availability of cable broadband, but almost impossible to tell from the report, which seems to allow for some speed degradation on cable broadband even though Virgin Media use cable lengths where this is not the case. Most worrying is that they have not acquired any speed test data for their analysis prior to 2008 (hint our summaries from back then are still online), appearing to assume that the cap of 2 Mbps applied until 2006 when speeds rose to 8 Mbps. Missing out the launch of a 16 Mbps ADSL2+ service in April 2006 by Bulldog, UK Online with ADSL2+ in November 2005 and Be Unlimited in the summer of 2005. Cable services in 2005 were launching 10 Mbps products.

Comments

Posted by timmay over 2 years ago
Out of date before released, what a pointless study and not news worthy.

We all know that broadband availability has some affect on house prices. It definitely has some affect on the saleability of a property which can result in it being on the market for longer and the seller being forced to reduce the price. In this day and age a property without broadband likely only sells to someone that didn't check or doesn't care about broadband.
Posted by AndrueC over 2 years ago
"We all know that.." no, not really. A mate of mine has his house on the market. He actually paid to get FTTC earlier this year because he thought it'd help with the sale. Now he's finally got around to putting it on the market none of the prospective purchasers have shown any interest.

They are far more interested in local schools, what the neighbours are like and where the nearest pub is. One bloke did ask about it - but only to check that it was possible to go back to ADSL because he didn't see any point paying for high speeds.
Posted by y592euyt over 2 years ago
LSE has got it wrong in saying that the case for universal delivery is not as strong. If one regards benefit purely in terms of property prices, they may be right, but faster broadband brings far more benefits than that: viability of rural firms, social benefits for residents, educational benefits for pupils/students. This is a very short-sighted study. My fear is that government may use it as a justification for providing rural areas with second best provision.
Posted by PhilCoates over 2 years ago
'..My fear is that government may use it as a justification for providing rural areas with second best provision.
..'

They already have. 2Mbps by 2016.....
Posted by Blackmamba over 2 years ago
Hi Broadband Watchers.
Most house buyers are not interested if they have SFB they do not even look at the house sales data (energy certificate) and as for having a HIP where all the information would be reqestered the seller does not like paying for this booklet (Buy beware).
Posted by Desmond over 2 years ago
The same methodology would likely conclude that the case for rural telephones, electricity, gas and mettaled roads was not strong either,
Posted by herdwick over 2 years ago
My experience is that people start to think about broadband *after* buying their new executive home 5 miles from the telephone exchange and 2 from the (non-FTTC) cabinet. After that they discover the horrendous LPG contract they've fallen into for heating etc.
Posted by londoner123 over 2 years ago
Did anybody actually READ the report or just the headlines?? It does actually project the results into 2020 taking the Digital Agenda into account
Posted by andrew (Favicon staff member) over 2 years ago
It may have projected, but with a baseline start point that did not look at the emerging fibre based services.
Posted by chasfgr over 2 years ago
Looks as though LSE are answering a question that wasn't asked.
Should have looked @ earning power not property prices.
Posted by michaels_perry over 2 years ago
EPCs are totally misleading, HIPs are not required any more, so both irrelevant. Rural properties benefit most from SFB as most are still struggling to get to 2 Mbps, rural businesses are struggling as they don't have fast enough connections to run their own websites so have to outsource at considerable expense. Benefits of rural SFB outweigh costs.
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