Labour proposes nationalising Openreach and free broadband for all - updated 16th November
Free broadband for all and it will be full fibre broadband too, and funded by a tax on the profits of multinational online companies that trade in the United Kingdom.
This is what the Shadow Chancellor John McDonnell is proposing that Labour will do if elected in the General Election on December 12th.
The expectation is that an extra £15 billion will be committed to the roll-out of FTTP on top of the existing £5 billion from the current Conservative Government and in view of the large investment from the Government the Openreach arm of BT Group will be nationalised with shareholders compensated by Government bonds.
Free broadband for the country. I've been touring around the country for the last couple of years doing these town hall meetings where we're bringing people together to talk about their local economy. And apart from some parts of London and some of our major cities, everywhere I go, they're saying that we've either not got broadband AT THE SPEEDS that we need is holding our economy back, or it's actually impeding on people's social engagement as well. The government's come forward with a 5 billion pound investment, but actually it's nowhere near enough, so we're saying it's going to cost about 20 billion. We'll put the extra 15 billion in. We'll ensure that broadband reaches the whole the country. We'll start with the more difficult to reach areas first and then work through the smaller towns and then into the cities themselves only about 10 to 12% of the country has covered up at the moment. If you look at Japan, Korea, it's 97 99%. But the way that will do it is, if we're putting that scale of public money and taxpayers money in, we want to ensure actually we own it as well. And that means bringing parts of BT into public ownership Openreach in particular, rolling out the broadband programme, making sure that's free to people so that they, well they can participate in the way that they haven't in the past both economically and socially. And it will have environmental effects as well all the figures are telling us we can, we can grow the economy the prediction is about 59 billion pounds in terms of growth, increased productivity, but also a reduction in commuting where people work from home but also people say yes moving out of some of our cities as well to live in rural areas, so it will stimulate rural areas too. All of that is good to the economy but good the environment.Extract from interview by BBC with John McDonnell
The £20 billion is probably about the right amount to get the UK from its current 10% full fibre coverage figure to full coverage, though if truly doing 100% of premises there will be those that cost many times the average cost and might push the amount needed beyond £20 billion. In terms of timescales Openreach has already been scaling up to hit its 4 million target and then if conditions are right carry on to 15 million premises for 2025, so in terms of pace it seems possible, but is still a significant ramp up in delivery volume of today.
The free element sounds extremely attractive, but there are ongoing costs with broadband networks such as repairing network faults from storm damage and connecting new buildings e.g. 200,000 new homes each year would use around £60 million of the £230 million running costs that Labour say experts have advised them to run the network. Or put another way the estimate of running a free broadband connection is around 50p per month. One hopes the experts have remembered to account for things like broadband hardware, running call centres etc
Though we have to ask will it really be free? Openreach currently does not provide an end to end service, their responsibility ends at one of 1,200 or so handover exchanges.
So the question to ask now is will the FTTP service actually be free for retail broadband providers and then people pay the costs of them getting that data from say Swindon to the wider Internet. On the current FTTP services that retail at around £40/m, the Openreach element accounts for about £20 of this, so people would still be paying something in the region of £15 to £20/m. Or is the nationalisation also going to include elements of BT Wholesale so we really will have a 21st century full fibre GPO and it really is full end to end Gigabit broadband for free.
The pension funds appear to be on board, with them being more interested in a secure stable rate of return. So the possibility of legal challenges from those that Labour has talked to appears to be minimal.
Now for the elephant in the room, how will firms like City Fibre, Liberty Global (Virgin Media/Liberty FIbre), Sky, TalkTalk (FibreNation), Hyperoptic, Gigaclear and the numerous other start-ups that have secured speculative investments be able to compete against a free nationalised operator? Some will say that Virgin Media has its video packages to fall back on, but the subscription package market is undergoing a rapid change and expensive big packages are falling out of favour with the public.
The legal challenges when they arise if this nationalisation plan comes to fruition are most likely to be from the current competitors to Openreach who have actually built competing networks and will be looking for compensation for not just sunk costs but destruction of their future business model.
A final comment, the £20 billion roll-out cost is in the right ball park for building premises passed network, but there are additional costs for those final few metres crossing the drive/garden/pavement into each individual home and this could add a couple of billion pounds to the total. Normally this cost is rolled into the setup fee and minimum contract term that people pay when buying broadband.
Update 8:15am A few words to add to the original article. The nationalisation will also include the broadband relevant parts of BT Group apparently, which we would take to mean BT Enterprise (often known as BT Wholesale) for the core network linking handover exchanges to the Internet and also parts of BT Consumer i.e. broadband customer parts such as billing which even if service is free a customer relationship will be needed for dealing with faults and engineer visits, plus call centre staff. What would be left of BT to survive is not clear, BT Sport and phone call packages?
What will happen to the long tail of hundreds of retail broadband providers is a big unknown, it may be they will be able to subscribe to free broadband tails at the handover exchanges and be allowed to sell a service, but how many would pay £20/m when free is available. Survival would depend on what billing for things like email, which unless you use a free service where your email is harvested for advertising data might switch from being free with your broadband to costing £10 to £15/m.
Often missed in the political commenting is that this is free broadband for both consumers and businesses. Business use of free broadband raises more questions, since a small 3 people vehicle repair garage will have very different requirements to a video editing business with 10 suites all working on 8k footage. A business with basic needs will happily reside on a consumer style service, but the video editing example may well need 1:1 contention guaranteed e.g. Gigabit or 10 Gbps without fail from their building to the Internet at large, in the existing market place this is the difference between a £25/m business service and ones costing £100's or £1,000's per month. Also to add further complication, static or dynamic IP addresses (IPv4 and/or IPv6) and custom reverse DNS to name a couple more variables.
Two arms will exist, BDI - British Digital Infrastructure tasked with building and maintaining the network and BBS - British Broadband Service who will deliver the free broadband.
Final thought (for now): The target for completion of the roll-out is 2030, but what we don't know is when will the first areas have access to the free service and will this only be free on the full fibre network, so those waiting on various partial fibre services will be stuck paying for their broadband.
Update 9:35 It is being reported that TalkTalk has put the sale of its full fibre broadband service on hold due to the Labour proposals. This could be seen as over reaction but given the plan is public and would have major ramifications for any investor in broadband roll-outs in the UK taking a pause until the results of the General Election are known would seem the sensible thing to do.
Update 10am: As we would expect with such a big proposal the industry comments have started to arrive.
As a collective industry, driven by competition, we are already working to deliver full-fibre to all parts of the UK; with many rural communities already enjoying these benefits. Labour's announced proposals are ill conceived, completely out of tune with reality, slicing and dicing an advanced vibrant industry that will set the delivery of full-fibre back even further. Any sensible Government should be working with an industry, not looking to be on full collision course with it.Martin Pitt, Managing Director, Aquiss Limited
Update 11:15am We don't know what speeds the free ultrafast service will offer, but ultrafast by definition is 100 Mbps and faster or 300 Mbps if the Ofcom definition is used, but after years of getting used to watching out for the catch to free broadband deals we are left wondering why unlimited has not been mentioned with respect to the free broadband service? It seems possible that the free service may be a basic 30GB monthly data allowance with per GB billing thereafter. Hopefully more detail will emerge on the policy as the public perception is currently a free unlimited ultrafast connection and probably Gigabit speeds.
Labour’s plan exposes a fundamental misunderstanding of how broadband is delivered in the UK.
Labour has identified some challenges relating to broadband infrastructure, but has wildly underestimated the costs involved. This proposal would also undermine the huge private investment and existing work already in motion to deliver nationwide access to gigabit broadband.
More importantly, this proposal not only jeopardises the 600+ companies that use Openreach infrastructure but also those investing in alternative and competing networks to provide the services and connectivity that businesses and consumers throughout the country rely on. Our members range from small regional ISPs to household names with thousands of employees and it is extremely worrying that Labour has given no consideration to how their plans would affect them.ISPA Chair Andrew Glover commented
Update 11:30am Jeremy Corbyn speaking in Oldham has said the following on the free ultrafast broadband plan:
A Labour government will make broadband free for everybody. And not just any broadband, but the very fastest, full-fibre broadband, to every home in the country.
Just 8 to 10% of the UK has access to full-fibre broadband. In South Korea, it is 98%, he says. He says this is essential infrastructure. The best way for this to be provided is for the public to take control of it. Labour will create a new entreprise, British Broadband, overseeing a publicly owned network, delivering full-fibre broadband within 10 years. This will show Labour using public investment to transform the economy. This plan will also have national security implications, he says. The current companies have had little incentive to roll-out full-fibre broadband to remote and rural areas. Labour would prioritise those areas. And then it would roll it out in towns. Finally it would complete the roll-out in urban centres.
Corbyn says there will be guaranteed jobs for people currently working in the broadband industry.
Corbyn says Boris Johnson promised to make full-fibre broadband available for everyone during the Tory leadership contest. But people would have to pay for it.
And now we have seen the government’s plans, they involve copper cables that are already out of date, he says.Extracts from Jeremy Corbyn Manifesto Speech - credit to The Guardian for its transcript
A quick fact check on the copper cables comment, believe he is referring to the switch from 100% full fibre to 100% Gigabit i.e. Conservatives relying on existing Virgin Media network once upgraded to DOCSIS 3.1 in urban areas. Which while correct a large amount of this is due to be overbuilt by competing full fibre networks, certainly there is no plan to deploy more coax or copper twisted pair using public money.
Those working in the UK broadband industry will probably need to have a lawyer take a look at the actual wording for guaranteed jobs for people working in the broadband industry, i.e. is this referring to only BT Group and Openreach employees or does it stretch to the long tail of 500+ Internet service providers, Ofcom staff and ancillary services (believe sites like thinkbroadband and ISPreview would fit into the latter category) that would not be needed once the new BDI and BBS are up and running and no-one sees the point in paying for broadband when you can have the fastest full fibre speeds.
On slightly humorous note we wonder who proof reads the speeches since promising the very fastest full fibre broadband could mean anything from 1 Gbps to the 10 Gbps some are already looking to deploy to speeds of 40 Gbps and higher that are currently usually the domain of full fibre core networks.
Update 5:20pm: More feedback on the policy idea
For the UK to become a world leader in full fibre and 5G, it needs to provide access for all, wherever people live or work and we are pleased to see the commitment Labour has shown to this through its latest pledge.
It is crucial, however, that how broadband is funded, rolled-out and provided is considered, along with the wider impact the plan could have. The UK’s broadband market is currently thriving as a result of infrastructure investors and local communities, alongside the public sector. £3.3bn was committed by investors in alternative network providers (altnets) last year alone, in addition to investments by BT and Virgin Media. This has led to the deployment of Gold Standard world-class networks in cities and towns across the country, including in previously underserved rural areas, growing from a very low base of about 1% of premises to around 10% today. Accelerating the pace is important and all parts of the industry are working to do that.
While we welcome Labour’s focus, we are concerned that some parts of the policy, for example, nationalisation, will dampen the vibrant market for investment in new fibre networks in the short term, thus delaying fibre roll-out. Free broadband is an attractive consumer proposition but will be costly, could undermine innovation and consumer choice, as well as having a detrimental effect on the service provider sector.INCA CEO Malcolm Corbett
Labour have rightly identified the potential of widespread full fibre and the transformative benefits it will bring to the UK. However, as an industry we believe this proposal will halt the significant investment already flowing into the industry, slow the large scale builds currently underway, risk jobs now and in the future, and leave consumers with no choice. We stand ready to work with whatever Government is elected on best way to deliver fit for purpose broadband to the UK as soon as possible and will provided further comment on Labour’s plans in the coming days.INCA has also signed a joint statement with TechUK, UK Competitive Telecommunications Association (UKCTA), and ISPA
Update Saturday 16th November: In a busy Thursday night and Friday that saw us doing a number of radio interviews using FaceTime on a VDSL2 connection one comment from a full fibre operator was missed so adding it now.
This country’s robust and competitive telecoms industry is already working hard to deliver full fibre for all, using a mix of public and private money. Rather than upset the apple cart, we urge whoever is in government to be careful about how they use public money to effect this change and to support the myriad of infrastructure providers that are working tirelessly up and down the country to deliver this game-changing infrastructure to every post code.Evan Wienburg, Truespeed CEO, on Labour’s plans to nationalise Openreach