Broadband News

Only £1.2 billion of public money for 100% Gigabit target ahead of 2025

We thought there was a small possibility of extra funding in the latest Spending Review for the final 20% of the UK that was most likely to miss out on a commercial Gigabit roll-out, possibily in the form of incentives for those building Gigabit networks to take on additional staff and accelerate their commercial plans and also kick start contracts for the final five to six million premises. 

Alas the Spending Review (pdf document) suggests that using the labour intensive aspects of the Gigabit roll-out to improve employment rates in the short to medium term is not on the cards.

Scanning the document reviews that unless something radically changes the Government appears to have abandoned the goal of 100% Gigabit coverage by the end of 2025 (we were previously assuming 31st March 2026 in all our workings). Why does it look like it is has been abandoned? Because only £1.2 billion of the available £5 billion has been allocated to the financial years ahead of 2025.

  • Financial year 2021 - 2022 £100 million capital programme investment
  • 2022 - 2023 £300 million
  • 2023 - 2024 £400 million
  • 2024 - 2025 £500 million

This £1.2 billion is described as the first four years of the £5 billion Gigabit Broadband programme, exactly how long the Government expects it to run is unclear, but if the £100 million extra spending a year was to continue it would suggest an end to spending in the 2029 to 2030 financial year

The pandenmic has obviously had a massive impact on the money available for capital projects and it may simply be the Gigabit programme is seen as a casualty of the need to try and control spending to some extent in the next few years.

For those reading this and are stuck with sub 10 Mbps broadband this suggests that the existing USO and other voucher schemes are going to remain the key way for these people to get a much better service in the next few years. If the voucher schemes and the few thousand extra FTTP premises a month from the various BDUK contracts does close the superfast gap to something much closer to 100% then that is welcome.

The 100% target was always going to be ambitious and hints had been dropped that the most expensive to reach final 1% might end up missing out again and there was also lots of questions about who would build the FTTP networks when the exisitng commercial operators are already busy building to meet their own individual targets.

The UK is set to rise to somewhere between 60% to 70% Gigabit coverage if Virgin Media completes its DOCSIS 3.1 switch-on as planned in 2021. If no more FTTP is built and just DOCSIS 3.1 turned on the UK will be at 61.2% Gigabit coverage, the 10 percentage point range illustrates the unknowns over the degree of overlap between new FTTP builds and the DOCSIS network. We published a prediction on how the Gigabit and FTTP roll-outs will go back in October and while the current Gigabit coverage of the UK at 35.4% is slightly ahead of the prediction this is simply because Virgin Media switched what is probably its largest chunck of DOCSIS 3.1 since October.

To end with we predict that £1.2 billion if all spent on Gigabit roll-out and the intervention averaged out at just £600 per property it might deliver 2 million premises giving a prediction of 81% Gigabit coverage at the end of 2025. If the more difficult areas and arguably the most in need are tackled first this £1.2 billion might deliver less than 200,000 premises extra i.e. less than 1 extra percentage point on top of our October 74.9% commercial prediction.

Update 3:42pm Removed an extra 0 from the £6,000 per property cost, as had used the wrong envelope of scribbles when writing up article. 

Update 6pm: Added statement from ISPA.

Today’s announcement scaling back the Government’s ambitions for supporting broadband rollout in the hardest to reach areas is a blow to rural communities. Instead of aiming for nationwide coverage, Government now expects coverage of 85% and with only a quarter of the previously promised funding allocated until 2025. This will not stop providers from continuing to press ahead with their commercial rollout plans, but it puts an even greater emphasis on tackling the regulatory and practical barriers that make rollout more difficult than it should be. As our experiences over 2020 have proved, our broadband infrastructure is fundamental to propping up the UK’s economy in periods of lockdown, so we urge the Government to ensure that this policy pivot does not lead to longer term digital exclusion of those in harder to reach areas.

Comment from Andrew Glover, ISPA Chair

A few more words to add on the 85% aspect, if the UK does reach 74.9% commercially the £1.2 billion would need to provide a Gigabit service to some three million premises, which gives an intervention spend of just £400 per property. £400 per property is the sort of cost seen in urban roll-outs so it looks likely that the Government is hoping for the commercial roll-out to be much higher than 74.9% or is expecting those winning contracts for the patchwork of areas to at least match the amount of public money. Another possibility that might happen is that 5G in a fixed wireless deployment will be used heavily or someone is sold on the idea of low earth orbit satellite solutions delivering 900 Mbps options affordable to residential users by 2024.

Update 26th November: Added comment from INCA

The whole point of the Outside-In funding programme is to ensure that hard to reach areas don’t get left behind in this massive upgrade to the UK’s digital infrastructure. Build plans by Openreach, Virgin Media and altnet challengers have been ramping up, but we agree that reaching 100% by the end of 2025 was always going to be difficult.

The government has recognised that completing a full commercial build and tackling the subsidised harder to reach areas at the same time is very challenging.” Mr Corbett said. “Having spoken with officials our understanding is that the £5bn of funding committed in the National Infrastructure Strategy is ring-fenced and if more of that funding can be brought forward into the Spending Review period, that will happen.

The importance of renewing the UK’s digital infrastructure is well known in government – indeed National Infrastructure Strategy is peppered with references to gigabit broadband. Industry is stepping up to the task. INCA estimates that investment in the challenger firms will reach £7.7bn by 2025/6 taking the total private investment to around £25bn including BT/ Openreach and Virgin Media. This investment is based on the expectation that government will play its part too.

INCA Chief Executive Malcolm Corbett

The final paragraph from Malcom Corbett expresses something we had been mulling since the news broke on Wednesday afternoon, namely with a watered down target investors and broadband firms may see the pressure to deliver is less and change their own investment plans i.e. rather than an all out effort to complete their own work by 2025 they may reduce their debt exposure in the short term by pushing completion dates to 2027 and beyond. Another very real possibility is that the big providers may rather than venturing to new untouched by FTTP or Gigabit towns they will focus on winning customers in the most dense urban areas, i.e. more overbuild of the Virgin Media DOCSIS 3.1 network may occur and competitors FTTP networks. The reason for the increased overbuild is that the cost per premises passed in the dense residential areas is likely to be low enough that even if you only get 15% take-up the ROI is still better than 30% take-up in another area.

Comments

This is reported on the BBC News just now...

"Ambitious plans to roll out gigabit-speed broadband to every home in Britain by 2025 have been rolled back in Chancellor Rishi Sunak's spending review.

Now the aim is to have a "minimum of 85% coverage" by that date."

So those of us in the rural and semi-rural areas will get left behind again.

  • DanielCoffey
  • about 1 month ago

I'm not clear if that 1.2 is just whats been allocated now but more will come as that has been the suggestion.

  • Croft12
  • about 1 month ago

£1.2 billion for first four years of programme, beyond that timeline is unknown and the presumption has to be that the £5 billion is still there minus what is spent in first four years.

  • andrew
  • thinkbroadband staff
  • about 1 month ago

The spending review is only for 1 year. Only the £100m is secure. The rest will need to be brought back for approval next year.

  • ValueforMoney
  • about 1 month ago

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