Labour has made the most eye-catching pledge of the General Election campaign so far – a promise to deliver free fibre broadband for all by 2030.
It sounds like a surefire vote winner. But the way in which Labour is proposing to do it poses an enormous number of questions, most of which I’m yet to see answers for. Here, then, is what’s wrong with Labour’s free fibre broadband plan.
How is Labour going to deliver free fibre broadband for all?
Labour plans to invest £20 billion to improve Britain’s broadband network and connect every home and business to fibre broadband. Immediately we hit our first pothole, as BT – the company that has done the bulk of the fibre rollout so far – estimates it will cost closer to £40 billion. Nevertheless, the Tories have only pledged £5 billion of public money to address the same problem, so let’s at least give Labour credit for getting halfway there.
Labour’s Shadow Chancellor says he doesn’t want to plough in public money and not reap any of the benefit, so he plans to nationalise Openreach, the arm of BT that builds the broadband network. He says he will do this by issuing government bonds to shareholders, at an as yet unspecified price.
It’s hard to put a precise value on Openreach because it remains part of the wider BT group. But this won’t be cheap. Openreach employees more than 34,000 people (with massive pension liabilities), has a huge property portfolio, not to mention all the assets that come with running a nationwide telecoms network. BT chief executive Philip Jansen estimates the total cost of Labour’s plans will be nearer £100 billion. That – as a finger in the air estimate – seems about right.
Then we come to the most controversial part of the plan – to give everyone free broadband via a new company called British Broadband. So, instead of paying BT, Sky, Virgin or whoever your £30 per month for broadband, Labour would give it to every home and business for free.
Here is where Labour’s plan starts to unravel. Currently, the British broadband market looks something like this:
|Company who provides the network||Company that sells broadband to consumers|
|Openreach (owned by BT)||BT, Sky, TalkTalk, PlusNet, Zen Internet + dozens of others|
|Virgin Media||Virgin Media|
That’s a massive simplification, and there are other smaller networks in parts of the UK, but that’s effectively how it works. Broadband providers (including BT’s retail arm) either buy their connections wholesale off Openreach, or the network is run and sold to consumers by Virgin Media, who currently don’t allow other providers to sell connections on its network.
The massive hole in Labour’s plan is that it only plans to buy/nationalise one square of that four-square grid. What happens to all the broadband suppliers who currently sell the connections that Labour plans to give away for free? What happens to Virgin Media’s network? “Mr McDonnell said that if other broadband providers did not want to give access to British Broadband, then they would also be taken into public ownership,” according to the BBC.
So now we’re not only nationalising Openreach, we’re buying Virgin Media as well, at an additional cost of tens of billions of pounds. And then there are the broadband providers who’ve been put out of business by Labour giving it away for free – who’s going to compensate them?
How is Labour going to pay for all this?
So, we’ve already shown that nationalising the broadband network is going to cost far more than the £20 billion that Labour has set aside.
But let’s not forget Labour is now running a nationalised broadband network that has absolutely zero income because the connections are being given away. How does it plan to maintain the network?
According to the BBC: “A new entity, British Broadband, would run the network, with maintenance – estimated to cost £230m a year – to be covered by the new tax on companies such as Apple and Google.”
Firstly, that £230 million seems like a ridiculously conservative estimate, because not only do you have to maintain the network itself, you’ve also got to support every household and business in the country, which is now getting its broadband from a single supplier – the government! Imagine the staffing costs of the call centre alone!
Then we come to the notion that this will all somehow be covered by a new tax on the internet giants who “don’t pay their fair share”.
Labour says this tax would be based “percentage wise” on global profits and UK sales, according to the BBC. Now, I don’t pretend to be a tax expert, but that’s not how the international tax system works. Individual countries don’t get to tax US companies for profits they’ve made elsewhere. This will undoubtedly be challenged in the courts.
And, let’s not forget, these companies already pay taxes on UK sales – it’s called VAT – although the rules around avoidance of this tax could certainly be tighter. (Correction: as reader Loz Farmer points out in comments, VAT is paid by consumers, not companies. So, although Google, Amazon etc do indirectly contribute to VAT receipts in a significant way, they don’t pay those taxes themselves.)
There are so many other flaws with this plan, that it’s hard to know where to start or finish. But here are just a few more of the things that have occured to me:
- Broadband is normally bought as part of a package, along with TV, mobile phones etc. Will Labour’s plans really reduce household bills? Or will the companies simply keep charging at their current rates, because broadband is often thrown in for “free” as part of a television bundle?
- The massive privacy implications of the government running the broadband network. Will the security services be given access to the network? Will the internet be censored to “protect the children”? Huge questions here.
- You’ve just created a single point of failure for the entire UK broadband network. Everyone is getting their service from a single supplier. A cyberattack on one entity takes out every home and business in the country. Do you really think the government has the expertise to guard against this? Labour thought a rudimentary denial-of-service attack on its own systems earlier this week was a “sophisticated attack”.
I’m not a Labour supporter (nor a Conservative supporter for that matter) and I’m trying to look at this dispassionately, but this is genuinely one of the worst, most incoherent, poorly thought out pieces of government policy I’ve ever seen.
NOW READ THIS: How much compensation are you due if your broadband goes down?
“this is genuinely one of the worst, most incoherent, poorly thought out pieces of government policy I’ve ever seen.”
You’ve not read much into HS2, then?
Another big question: Is it about to be leapfrogged by technology (e.g. 5G)? Fancy investing £20bn in what might soon be seen as obsolete? That’s like Time Warner buying AOL.
I remember paying £25/month for BT Openzone in 2005. Now I’m surprised if I’m charged for wifi at all when I’m out, and my mobile data is only £16/month for 30gb.
5G might be competitive now, but not in 10/15/20 years’ time, when it will need to be replaced by the next generation of mobile technology. Fibre is effectively limitless in terms of speed.
“Will the security services be given access to the network? Will the internet be censored to “protect the children”? Huge questions here.”
1) Already happens. (See: Guardian reporting on tapping of undersea cables, transmissions, etc.)
2) Already happens. (See: Internet Watch Foundation.)
The other questions, particularly about how this is funded (maybe you’d charge businesses?), seem to have more weight.
But nationalising BTOR (which might be tricky, and expensive) does seem to me a generally good idea. BT doesn’t run it in the public interest, not that it’s required to, but it has the natural monopoly on infrastructure and no incentive to upgrade it in a hurry. BTOR is a cash cow division.
Take your point on one. On two, I was more thinking of mandatory blacklisting of certain sites, which would be much easier to achieve with a single nationwide provider. I think there’s an argument to be had for nationalising Openreach, but my big fear is the government will be no better at developing the infrastructure than BT is – and perhaps a damned sight worse. In the meantime, all private investment in the network will be frozen (as we’re already beginning to see today) because of the uncertainty.
VAT is a consumer tax, paid by consumers. Companies are merely the middlemen who collect it and pay it to HMRC. A fundamental error in an otherwise interesting piece.
This is a good point. I stand corrected and will edit the piece. Thanks, Loz.