£5 billion big sticker price tag for Gigabit broadband is in the budget
The Conservative Manifesto from the General Election in December set the 2025 Gigabit for all challenge and talked of putting £5 billlion of money into it and now with the first Budget since the election the Chancellor Rishi Sunak seems to be confirming the money will be budgeted for.
The £5 billion is meant to fund the roll-out of a Gigabit capable service to the 20% of the United Kingdom where Government has identified that it does not think the commercial operators will go. Interestingly a lot of the coverage is talking about this being money for rural areas, but there will be pockets of urban areas that will miss out on commercial roll-outs for a number of reasons. One interesting point is that the urban Gigabit not-spots may be the ones that see 5G used resolve the not-spot or commercial roll-outs using the mmWave frequencies will cover these anyway.
What we don't know is exactly how the money will be divided up e.g. will there be local authority level BDUK type projects again, or possibly larger regional based projects. Vouchers are another possibility, but its worth pointing that vouchers to lift people out of the sub 2 Mbps hole have been around for a number of years now and have failed to resolve all those. Vouchers work well if you have a very engaged public, but the vast majority of the public want ordering better broadband to be easier than buying a pack of 12 toilet rolls in the last week.
With the £5 billion announced on Wednesday, how soon will we see things changing? Well there will be procurement processes to go through and while the UK is in the transition phase of leaving the EU the State Aid rules still apply until the end of the year.
For timescales, a history lesson might help, the original central funding for the BDUK contracts was £530 million announced in October 2010 made up of £230 million left from the Digital Switchover fund and £300m from the TV licence. The first VDSL2 cabinet that went live under the BDUK contracts was in Ainderby Steeple, North Yorkshire in December 2012. Therefore based on both the timescales of recent contract announcements and long term history it seems likely that the first inventions will happen in late 2021 or early 2022.
Is £5 billion enough? Well if it is 20% of UK premises by end of 2025 that would be around 6.2 million premises and therefore £800 per property. In dense urban area the price of rolling out full fibre in bulk can be as low as £300/property, but as the Scottish R100 project is budgeting on sums of £1,500 to £5,000 the signs exist that delivering to rural areas is more expensive. Of course the R100 project may be delivering to some of the most expensive UK locations and the £5 billion is based on the pre-sumption that R100 will deliver full fibre to all the difficult bits of Scotland leaving the Westminster funding to cover the VDSL2 cabinets delivered in the centre of the remote villages.
We might learn more on Wednesday, but local authorities may just as with the BDUK contracts be expected to match fund, and commercial bidders for the contracts to also weigh in to at least gap fund. We suspect that local authorities will be reluctant to find the equivalent of £5 billion or while some may be keen to do they will not have the money left in their contigency reserves to do so.
We looked at whether the Government target of needing to intervene in 20% of the UK was realistic a few days ago and while there is a scenario that gets to that point, this was a best case scenario. If the commercial roll-outs are slow or one or two operators hit financial problems or there is too much overlap as providers compete for customers we could easily see 20% grow into 25% of the UK.