BT Says EU Should Let Governments Fund Urban Broadband – Rivals Disagree

BT believes the UK Government should reach an agreement with the European Union (EU) to allow for state intervention to provide superfast broadband in urban areas where it is not economically viable for a private firm to do so.

Under current European regulations, public funding can only be used to intervene in rural areas, with the private sector expected to cover urban locations.

However, it is estimated that between one and two fifths of the ‘final five percent’ of premises not covered by commercial rollouts of fibre or phase one or two of Broadband Delivery UK (BDUK) are located in cities.

Urban Notspots

Such ‘notspots’ are even present in London and are generally caused by the absence of a cabinet to upgrade because of the number of direct connections.

While this is frustrating for consumers, it’s potentially damaging for small businesses, which generally have less access to superfast broadband compared to the population. Two thirds use ADSL connections as fibre is only available to 56 percent of SMBs.

“These are really challenging areas and we believe you’re going to need some intervention,” said Julian Ashworth, industry policy director at BT, who cited a number of supply-side cost issues. “You’re going to have to have some sort of agreement between the UK government and EU.”

Powerless BDUK

BDUK CEO Chris Townsend assumed his position in April 2014 and said the inability to help urban areas was a “surprise” to him.

“I know BT and Virgin Media are working on this but personally, me and my team can’t,” he told a Westminster eForum. “I’m not allowed to intervene with fibre, but what I am allowed to do is lead a demand led programme.”

This demand led programme is the Super Connected Cities voucher scheme, which provides grants to SMBs to help them upgrade to superfast broadband. A range of suppliers participate in the scheme, which has been expanded to 50 UK cities.

“I think there’s a need for intervention in those areas,” said Ashworth, whose company has so far won all of the public money available from BDUK.

Industry objection

However BT’s rivals oppose the use of government funding, claiming that it has simply strengthened the former state monopoly’s position in the fibre broadband market, reducing competition and harming consumers by removing incentive to invest in network infrastructure.

Vodafone, TalkTalk, Sky and Virgin Media are of the opinion that BT’s position is too strong and that fibre is not as competitive a market as copper as most service providers are reliant on the Openreach network to varying degrees.

Sky said the fact that the government itself – not the commercial sector – has had to advertise the availability of superfast broadband is an indication that the market is not competitive enough, while Virgin Media doesn’t want its cable network expansion to be hindered by regulatory requirements.

“The government has an obligation to the taxpayer to extract as much investment possible from the private sector,” said Daniel Butler, head of public affairs at Virgin Media. “Any intervention to notspots in cities should be tightly limited to areas where there is not incentive to invest.”

BDUK has so far connected two million homes and businesses to areas that would not otherwise be covered by superfast broadband as part of the government’s aim to reach 95 percent of the UK population by 2017.

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