Is the government about to step in to rescue the roll-out of fibre-optic broadband across the UK? Top 10 Broadband takes a look at what government funding would mean for the industry.
The at-risk fibre wire roll-out could be rescued by the government, Gordon Brown has suggested, as part of a latter-day digital version of the New Deal that rebuilt America's infrastructure and inspired its economic recovery from the Great Depression.
Suggestions that the government could commit money to the roll-out of next generation broadband technology have stemmed from an interview with the Prime Minister which was published in the Observer at the weekend. Mr Brown told the newspaper that a public works program is being planned which is hoped to create 100,000 jobs and that the scheme will include high-tech initiatives. This will be backed by a £10 billion fund.
The likelihood that Mr Brown would commit a portion of this money to the fibre optic roll-out was raised when he told his interviewer that he considered a next generation network “a very important thing” for the nation’s economic recovery from the downturn. The Prime Minister seemed explicitly to draw comparisons between this scheme and the New Deal program of the 1930s spearheaded by Franklin Roosevelt’s Democratic government.
He said: "When we talk about the roads and the bridges and the railways that were built in previous times - and those were anti-recession measures taken to help people through difficult times - you could [by comparison] talk about the digital infrastructure and that form of communications revolution at a period when we want to stimulate the economy. It's a very important thing."
News of his remarks comes amid claims that UK internet service providers (ISP’s) could struggle to honour their funding commitments to the roll-out in the face of falling revenues. The slump in cash flow for providers is this year expected to result in part due to saturation of the UK broadband market after years of exponential growth.
BT, which is the UK’s largest broadband provider, in particular is rumoured to be under pressure from shareholders to drag its heels over committing £1.5 billion to a fibre-optic network. It is thought that this stems from the perception that the company would be better served by shoring up its capital ratios to protect it from the worst of the current financial climate. To underline the financial pressure being felt by broadband providers, both Virgin Media and BT last year confirmed they plan to cut thousands of jobs in 2009.
However, the potential for the government to step in could make the outlook for BT and rival ISP’s look considerably rosier, with telecoms industry analysts anticipating that any bail out of BT would be conditional on it sharing the new network with rival providers. What can be said for sure, though, is that the notion that the government would step in to assist with funding fibre-optic broadband marks a sea change in policy. This is illustrated by the fact that last year a report into next generation access concluded that the case for public money to be used was “weak at best”.
Separate studies from the Broadband Stakeholders Group have pegged the estimated cost of brining fibre optic networks to every UK home at approaching £30 billion.