Broadband News

£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. 

Comments

Regarding the timing of the next round of interventions, Fastershire in their 2019-2022 Broadband Strategy (section 5.2 Building Digital UK 'Outside In' Approach) are not as optimistic:
"...there can be no further supply side procurements until BDUK negotiate a new state aid regime which is unlikely to be in place until well into 2021."
and
"It is likely that it will be 2023 until their Outside In plan is delivering in earnest."

  • sheephouse
  • 8 months ago

I hope they keep it simple and add administration at every level. Confirming £5bn in treasury expenditure plans without the detail of how it will be spent will just increase expectation for those within the 20% and could actually cause a stall of investment in those areas while providers wait to see the proposed subsidy structure.

I would have thought by now we could have modelled every premise in the country based on its distance from the local exchange, distance to future fibre hand over points etc combined with actual cost models from providers determine what subsidy applies by premise.

  • Meadmodj
  • 8 months ago

don't add

  • Meadmodj
  • 8 months ago

We already can do that model for Openreach network, but it is changing everyday as roll-outs take place, add the other operators rolling out and things get more complex in doing the forward projections.

In terms of subsidy by premise, desktop exercises will not identify a good many of the bumps that lift the cost too.

  • andrew
  • thinkbroadband staff
  • 8 months ago

Indeed. Unfortunately util the ducts have been rodded it's tough to provide even an educated guess as to costs involved per premises.

If ducts are in good shape it can be done for a couple of hundred quid a premises in cities, if they aren't 500+ per premises.

In more remote areas there's the costs of reaching the area to build out the distribution network in the first place which can cost a lot.

  • CarlThomas
  • 8 months ago

To say nothing of incorrect assumptions about soft verges (cf Gigaclear's CDS bid)

  • mpellatt
  • 8 months ago

I appreciate the complexity, I am suggesting a templated approach to reduce overhead and ensure certainty for investment. My view is that if the numbers are large enough it should be swings and roundabouts. BT traditionally used templated services for boxes, manholes and duct lengths etc with its suppliers. Templating would allow a provider to commit to 100% coverage of an area and would consolidate the subsidies (in bands) to meet the objective.
Technical specification would ensure performance and quality.
The subsidy could be based on bands (line length) and apply to non commercial areas.

  • Meadmodj
  • 8 months ago

I'll just wait to see the flesh appear on the bones.
One thing I wont be doing is getting excited at the prospect of anything remotely soon.

The rate of physical deployment in the rural landscape will be painfully slow. Add to that Government/Local Authority bureaucracy and contracting processes, the strategic deployment decisions to be made by companies building privately yet not wanting to jeopardize their slice of the funding.

Allocating the Budget for this Is very likely the easiest part.

  • Swac3
  • 8 months ago

Hopefully this will close some the anomalies in the system. I live in rural West Sussex and the day I moved in Openreach contractors were rodding the ducts outside my house to provide fibre to the houses at the back of the hamlet. Not that I am complaining since if have a reasonable FTTC speed but given, I assume, they have done what ever upgrades are required it seems odd I was not offered the option for FTTP.

  • CJC10
  • 8 months ago

@CJC10 As you are rural West Sussex was the FTTP done by the BDUK project? If so then you having reasonable FTTC would probably mean you were outside of the intervention area (just depends on what the others previously had). Also, where I live we had FTTP put in middle of last year - but only to our estate, I think because our estate is only 3 years old it was a relatively simple prospect whereas most of the other house are at least 15 years old so ducts more likely to have issues.

  • ian72
  • 8 months ago

@ian72 I have no idea how the work was funded but I am sure you are right about me being outside the intervention area. The point I was trying to make was that it should be reasonably cheap to upgrade the rest of us as most of the work has been done. If you drive around the lanes of West Sussex you will see lots of fibre. I could be wrong but if the work to connect properties outside the intervention area had been done at the time the cost would be marginally as it is you end up paying twice for the service.

  • CJC10
  • 8 months ago

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