UK government pumps £5 billion into broadband sector

In the first budget of the new Conservative government, the UK telecoms sector was just one recipient of a major public spending spree.

The announcement was broadly anticipated, having been promised by the PM and his team for months. The £5 billion of public spending announced was earmarked for ‘gigabit-capable broadband in the hardest to reach places.’ There was also £510 million of new investment into the shared rural mobile network and a reiteration of the pledge to reach 95% geographical coverage of 4G over this parliament.

The broader headline announcement was a £30 billion fiscal stimulus to help the UK deal with the coronavirus situation, including short-term loans for small businesses. This is coupled with the UK base rate being reduced by 0.5% by the bank of England this morning to represent an aggressive fiscal and monetary response to the severe slowdown that is now expected to take place while the coronavirus epidemic remains a threat.

It’s not clear yet how significant the failure to specifically name fibre infrastructure in the context of the 5 billion was. Is some of the investment going to go to technologies such as Gfast? Chancellor of the Exchequer Sunak proudly announced this was the biggest ever increase in public investment, but as ever the devil will be in the detail and much of the telecoms sector will only believe the pledges when they actually have the cash in their hands.

“Financial support for the government on rural broadband coverage is welcome,” said Mark Williams, Manging Director at Berkeley Research Group. “It’s the latest in a series of similar government initiatives going back several years. Ensuring ubiquitous mobile network coverage in the UK is challenging for both technical and financial reasons. The challenge for the government and for Ofcom is to ensure that this public funding is used quickly, efficiently and does not replace private investment that the operators would have made anyway.”

“The UK’s broadband connectivity has really needed a shot in the arm for some time,” said Kevin O’Donnell, European Business Manager at Viavi. “In terms of the percentage of population with access to Gigabit internet, the UK is in thirtieth place globally, according to our own research. The UK has been punching well below its weight. Currently, only around 11% of the British population have access to Gigabit speeds. The country lags behind nations such as Moldova, Qatar and France.”

“Getting the four operators to work together to improve rural coverage is a very sensible approach from a consumer perspective and a significant step forward considering operators were previously reluctant to network share,” said Maziar Nekovee, Professor of Telecoms and Mobile Technologies and Head of Centre for Advanced Communications, Mobile Technology and IoT at the University of Sussex.

“But it is disappointing that instead of pushing operators to take advantage of this arrangement to bring 5G to the whole country, the Government is focussing on 4G coverage. The danger is that we will see a new digital divide emerging with cities benefiting from 5G’s higher speeds and other benefits that 5G offers  for  health and care, agriculture, autonomous driving, while rural areas are stuck with 4G, with no incentive from operators to upgrade to 5G and also little room for regional companies to fill in the gap. In short the result could be that while the 4G not spots will disappear, they will simply become 5G not spots instead.”

“Investment in levelling up and Britain’s full fibre future is vital, so today’s Budget measures are hugely welcome, particularly getting to harder to reach areas that have been left behind for too long,” said Tristia Harrison, Chief Executive of TalkTalk. “But for Government to reach its full fibre rollout target, three things are vital: the consumer – so prices are fair; competition – so the £5bn rural subsidy doesn’t end in one company’s hands; co-operation within industry to deliver for the whole country.”

As ever with budget announcements it’s impossible to please everyone. The robust response to the coronavirus threat and the massive infrastructure spending spree will please a lot of people, but they’re almost unprecedented from a supposedly conservative government. They will have to dramatically increase borrowing to fund this splurge and maybe even raise taxes, which will have their own adverse consequences. The fiscal multiplier theory is about to be put to the test once more.