What is the UK government's £400 million fibre investment for?

The government has launched its latest initiative to tackle connectivity across the UK by offering up £400 million for full fibre broadband across the country.

It’s a nice number to parade around, but why has it taken so long for the UK to wake up to the benefits of a full-fibre diet. Even towards the end of last year, there were still executives preaching the benefits of copper, attempting to justify the half-way house of G.fast as a means to an end. While G.fast is certainly faster than current tech, the sense was that executives at BT and/or Openreach were too cheap to go fibre-deep.

“We are investing £400 million to make sure the UK’s digital infrastructure is match-fit for the future,” said Andrew Jones MP, the Exchequer Secretary to the Treasury. “As technologies change and people’s habits move with them, it is crucial we play our part to ensure Britain stays at the front of the pack.

“Gone will be the days where parents working from home see their emails grind to a halt while a family member is gaming or streaming Game of Thrones in the next room. Full fibre will provide us with the better broadband we need to ensure we can work flexibly and productively, without connections failing.”

While government investment to encourage investments in fibre networks is certainly welcome news, there are still a few questions which should be asked.

Firstly, shouldn’t the telcos be doing this already? Many will blame Openreach for the last of fibre mileage across the UK, though don’t forget Ofcom made a move in December which would allow other CSPs greater access to BT’s ducts and poles to encourage them to lay their own ‘full-fibre’ networks.

Fibre is expensive, and the telcos are not making as much money as they used to, but it is a bit of a sad sign that the UK government has to step in and essentially coerce the telcos into spending some cash on a fibre network which they are already advertising to consumers.

The second point which might be worth considering is whether this is going to be enough cash. £400 million from the government will in theory create a pot of more than £1 billion, once private investments are also accounted for, but is this enough? It certainly sounds like a lot of money, but full-fibre networks are incredibly expensive.

The investment itself will be in addition to the £23 billion National Productivity Investment Fund aimed at improving productivity. The fund will be managed by Amber Fund Management Limited and M&G Investments, which the government believes ‘will ignite interest from private finance to invest in the sector, resulting in more alternative providers entering and expanding in the market’.

What ‘alternative providers’ actually means is unknown for the moment, though we are unable to figure out what the government means. Do the government bods believe companies like Deutsche Telekom and Orange are going to be interested in the UK once again? Or will it mean start-ups will have a better chance? Or will it encourage regional players like KCOM and CityFibre to expand more nationally? We don’t know, and can’t figure out how the money is going to answer any of these questions.

Finally, where is the money actually going? This is the most important question, and one which has been gloriously ignored as the government carves out an snappy PR soundbite. Is the money going straight into Openreach? What about Virgin Media? It has been spending its own money on fibre optics for years, but is this proactivity in creating ultra-fast networks going to effectively work out for a punishment as public cash is dished out? Why give government money to someone if they are spending it anyway? Are companies who have been spending on fibre already effectively getting punished? What about niche fibre players?

At the moment, it would seem to be a ‘shock and awe’ play from the UK government. Let’s put a nice big number out there to show we know what we’re talking about, and figure out the details later. Jones has said £400 million, but he could have said 64p, a gajillion bazillion or a Smurf load of bonza; without specifics, the sum of cash is completely irrelevant.

It is also worth noting that this is the third time this investment into the fibre network has been announced by the government. Maybe when they get around to announcing it a fourth time in the Autumn they will actually have a plan.