The U.K.’s upcoming general election may be widely seen as being all about Brexit, but that’s not to say other issues aren’t also coming into play. And late Thursday, the opposition Labour Party chucked a particularly spicy new ingredient into the electoral stew.
Jeremy Corbyn’s increasingly left-wing party is pledging to renationalize the broadband network that’s owned by BT, the former state telecoms monopoly that was privatized in the early 1980s. Labour also says it may nationalize parts of other broadband companies if it enters government after the December 12 poll.
Labour wants to do all this in order to roll out free, full-fiber connectivity across the U.K.
The move has caused an uproar, with some cheering it, and others… well, in the words of Conservative Prime Minister Boris Johnson, it’s a “crazed communist scheme.”
BT’s shares dropped 5.5% on Labour’s announcement, and rival broadband provider TalkTalk saw its own stock fall 2.1%. TalkTalk’s planned sale of its full-fiber FibreNation business to Goldman Sachs-backed CityFibre Holdings was supposed to go through on Thursday, but is now on ice.
The Labour proposal does appear radical, but that’s not to say the U.K. broadband scene isn’t ripe for disruption. Speeds in the U.K. are not great—the country lags behind most of Europe, and holds 35th place in global rankings with a mean download speed this year of 22.4 megabits per second. That’s just behind Madagascar. (The U.S. is in 16th place with a mean download speed of 32.9 megabits per second.)
A big reason for this situation is that relatively few British homes and businesses have fiberoptic cables running directly to their premises—so-called “full fiber.” Most properties have fiber cables running nearby, but the vast majority rely on speed-choking copper to connect to the network. The figure for full-fiber connectivity in the U.K. is a lousy 8%, whereas in Japan and South Korea it’s almost universal, and in Spain three-quarters of properties enjoy such access.
Blame geography and economics. It’s relatively cheap and easy for an Internet service provider to roll out full-fiber broadband in towns and cities, where premises are bunched together, but difficult and expensive to connect each building in rural areas, where they are spread out. Government programs have brought full-fiber connectivity to certain rural areas, but around a fifth of the country remains stubbornly hard to reach, and a lot of poor towns also still don’t present a good business case to providers.
This makes a big difference to people’s lives and livelihoods—it makes rural communities and deprived areas less attractive for those wanting to run businesses or work remotely there.
Boris Johnson’s Conservative government is well aware of the problem. In September, it said it would spend £5 billion ($6.4 billion) to roll out full-fiber connectivity to even the U.K.’s most remote places by 2025.
Labour’s big idea is to nationalize BT’s broadband operations into a new, state-run company called British Broadband and provide free, full-fiber connectivity to everyone. The rollout would start with the communities that are currently worst-served—rural and poor inner-city areas first, then towns.
BT’s shareholders would be compensated with new government bonds, as would be the case with Labour’s various other nationalization plans for water networks, energy utilities, and railways.
“The Internet has become such a central part of our lives,” Corbyn said in a statement. “What was once a luxury is now an essential utility. That’s why full-fiber broadband must be a public service, bringing communities together, with equal access, in an inclusive and connected society.”
How would a Labour government pay for this seismic splurge? The upfront costs would come from a “green transformation” fund, on the basis that good connectivity would obviate the need for many people to drive to work.
The operational costs for running the nationalized network (which are much lower than the deployment costs) would supposedly come from increased taxes on big, multinational tech firms such as Amazon and Facebook—the U.K. is set to hit them with a “digital tax” next year anyway, as are various other European countries.
Let the arguments begin
This being the U.K., there is little consensus on the idea, especially its cost.
Labour claims the Conservatives’ full-fiber promises don’t make economic sense—it may have a point here, as Johnson’s government is promising to deploy fiber to all premises by 2025 at a cost of £5 billion, whereas the previous Conservative government was targeting 2033 at a projected cost of £33 billion. Labour says its own planned rollout would cost £20.3 billion, and the average person would save £30.30 a month that would have gone on broadband bills.
The Conservatives disagree with all this. They claim Labour’s plan would cost £83 billion over a decade.
The British tech industry is also not happy.
“These proposals would be a disaster for the telecoms sector and the customers that it serves,” said Julian David, the CEO of industry body techUK. “Renationalization would immediately halt the investment being driven not just by BT but the growing number of new and innovative companies that compete with BT…The telecoms sector has delivered increased coverage, capacity and quality whilst household spend on telecoms services has remained flat.”
“Labour plans broadband communism!” tweeted BT’s chief network architect, Neil McRae. BT CEO Philip Jansen was more measured, telling the Financial Times that the idea of free broadband would need to be carefully considered, though it would be “appealing” to consumers.
Jansen also said the rollout plan would cost £30-£40 billion, or up to twice what Labour is projecting. (Labour, it should be noted, says its figures are based on the government’s own analysis as laid out in a recent broadband review.)
It remains to be seen what Labour’s broadband pledge does to its poll numbers, but up until this point the party has been dragging behind the Conservatives by between 9 and 11 percentage points.
However, as things stand, the Conservatives are still likely to fall far short of a majority in the December election; they are only somewhere around the 40% mark in terms of support. That means there is still a possibility of Labour being able to form a coalition government with smaller parties. If it can get the Liberal Democrats on board, plus the Scottish Nationalist Party, Wales’s Plaid Cymru and the Greens (all anti-Brexit parties that are desperate to kick the Conservatives out of office,) it might even be able to manage a small majority in Parliament.
The Liberal Democrats, the U.K.’s third-biggest party, is a free-market outfit. It is difficult to see them agreeing to Labour’s nationalization plans—particularly this drastic example—as part of coalition policy. So unless Labour manages to somehow win a majority on its own, its broadband proposal may never come to fruition.
Still, there are almost four weeks until the election—a long time in politics, and particularly so in the turbulent U.K. As the telecoms companies’ share prices have been showing on Friday, a victory for Labour and its nationalization plans remains possible.
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