As Boris Johnson and Jeremy Hunt faced Scottish party members at a hustings in Perth recently, you can’t really get away from the Tory leadership contest, now in full swing.
You might ask what has that got to do with telecoms? Well in case you missed it, in June 2019, Boris Johnson pledged that, if he became Prime Minister, he would accelerate the roll-out of full-fibre connectivity to make it available to everybody by 2025. One of the concerns in the media is how much this will cost the taxpayer.
Boris’ bold goal
Currently, the UK ranks behind much of the rest of Europe in terms of fibre availability and Boris wants to change this. Ofcom estimates that full-fibre connectivity is only available to 7% of UK homes, while the FTTP Council’s March 2019 data estimates that UK household fibre penetration is 1.5% – one of the lowest in Europe (see diagram below).
Put simply, Boris argues that current government targets – to have full-fibre available to everybody by 2033 – are not aggressive enough to allow the UK to compete with Europe.
Boris’ connectivity ambition is not new. When Boris was Mayor of London, I advised him and his team on how to improve business connectivity in London. At that time, he was being driven by a spat he was having with Michael Bloomberg, then Mayor of New York City, about which City was best connected by fibre.
Fibre networks will play an ever increasingly important role in our connected-future as we demand high-speed, high bandwidth real-time connectivity. Fibre networks will also play an important role in future 5G networks as discussed in a previous article I published. In addition, the productivity gains from increased use of fibre are well documented. So, Boris is right to play the fibre fiddle to some extent.
The cost of Boris’ pledge
Boris’ pledge relies, to an extent, on existing fibre operators delivering most of that connectivity. Intelligens Consulting has analysed recent full-fibre announcements made by stalwarts BT and Virgin Media, and by the new generation of full-fibre providers such as CityFibre, Hyperoptic, Gigaclear and TrueSpeed.
Based on this analysis, accounting for some overbuild in competitive urban areas, it is estimated that 76% of premises are likely to receive commercially funded full-fibre by 2025. That means just below 7 million premises (i.e. the final quarter) will be unserved by full-fibre and will require public subsidy if Boris’ 2025 target is to be met.
Using Ofcom’s analysis of the ‘Capex per premises passed’ for full-fibre deployment then the entire cost of deploying the fibre to the ‘final quarter’ is estimated at just below £7 billion. Of course, if match funding principles are applied by the Treasury (as applied to previous broadband subsidy projects) the level of public subsidy required to achieve Boris’ 2025 target drops to just over £4 billion.
Even £4 billion is a significant amount of funding given precedents. The Chancellor announced £1.1 billion of funding in the 2016 Autumn Statement to support the roll out of full-fibre and 5G test beds, while the DCMS superfast broadband subsidy was estimated at £1.7 billion. If Boris does become Prime Minister then his Chancellor will need to dig deep and find at least another £3 billion to achieve his vision.
There will be many that argue fibre is not the answer and that lower cost wireless technologies should be used, particularly in rural areas. This is particularly the case in Scotland where 17% of the population is rural yet it accounts for 98% of the land mass. However, the technology, based on 5G, has yet to be proven as has been very recently demonstrated.
The bigger challenge
There is a more fundamental challenge that needs to be addressed – to do with the rate at which telecoms operators can install fibre at all those premises by 2025.
To achieve 100% full-fibre coverage will require the telecoms operators to deliver fibre to around 355,000 premises per month. For comparison, Openreach is currently rolling full-fibre to 80,000 premises per month. Even with the combined effort of all the telecoms operators Boris’ 2025 target will be difficult to meet without a significant, almost impossible, scaling up of the operations and installation teams of the operators.
In contrast, the Government’s 2033 target will require just under 152,000 premises to be passed per month – that, while not ambitious enough for Boris, seems far more palatable and achievable given current operator deployment rates.
In conclusion, there is a temptation to focus on how much Boris’ 2025 target will cost the taxpayer. The reality is that, even if the funds were to be made available, the UK’s relatively low starting position compared to other European countries leaves a significant uphill struggle to achieve Boris’ full-fibre target by 2025.