Is fibre optics a good place for UK spend?

Is fibre optics a good place for UK spend?
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First Published: Fri, Jan 16 2009. 11 45 PM IST

Updated: Fri, Jan 16 2009. 11 45 PM IST
As politicians desperately search for ways to create jobs and stimulate the UK economy, a government-led roll-out of superfast broadband is climbing up the agenda. The prime minister, Gordon Brown, and the opposition Tory party both have hinted at the merits of such a plan.
Brown hinted last week that a government-led roll-out of next-generation broadband could form part of his plan to create 100,000 jobs. “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,” Brown told the Observer newspaper.
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Investing in infrastructure for the future sounds attractive. Superfast broadband—which would enable users to download 100 megabits per second (Mbps)—would bring the UK up to speed with Japan and South Korea. Its advocates say this could transform the way Britons work with video-conferencing and space-age holographic technologies. But is a fibre optic network a good place to spend scarce government cash? Not really.
A national fibre roll-out would come at a minimum cost of £6 billion (Rs43,500 crore)—and could stretch to as much as £28 billion depending on the chosen technology, according to the Broadband Stakeholder Group. The bigger the spend, the better the technology and the faster the broadband speed.
Few see logic in deploying the costly fibre-to-the-home technology, which would require digging up roads on a huge scale, but the cheaper fibre-to-the-cabinet route won’t create large swathes of fresh employment.
Consumer demand for fibre is also as yet unproven. In South Korea, 80% of homes that have access to the superfast fibre network still opt to use the standard 2Mbps service which already covers around half of the UK and is adequate for everyday surfing. But each market is different. The uptake of Virgin Media’s 50Mbps UK cable service, which will be available to 50% of homes within six months, should provide a better indication.
What’s more, it’s difficult to see why the government should provide tax breaks or invest in fibre when the industry is already willing and able to spend at its own pace. British Telecommunications Group Plc. has said it will roll out 100Mb fibre to 40% of UK homes by 2012, providing regulation is attractive. Any government intervention at this early stage will simply politicize investment and potentially even stall its deployment, as in Australia, where subsidies are already offered.
The case for directing stimulus pounds to superfast broadband is unproven. Other sectors are probably more deserving.
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First Published: Fri, Jan 16 2009. 11 45 PM IST