Rural business owners and individuals will today be heartened by a report that highlights the true inequalities in Britain’s current broadband provision.
Published by the British Infrastructure Group (BIG) led by the Rt Hon Grant Shapps MP, the report states that “around 5.7 million people in the UK have internet connections that do not reach Ofcom’s ‘acceptable’ minimum speed of 10Mbit/s. 3.5 million of these people live in rural areas.”
Stressing the considerable damage that the lack of reliable fast broadband is doing to the British economy, the BIG report suggests a radical solution: force BT to sell off Openreach to encourage competition and drive improvements to the network.
Below we outline the report’s main findings, including details of the worst-affected areas, as well as the reasoning behind the proposed solution.
“Whilst rural SMEs and consumers are left with dire speeds, or even no service at all, Openreach makes vast profits and finds little reason to invest in the network”
The current situation
The report stresses that those in rural areas are the worst affected by inequalities in broadband provision. It found that:
- 3.5 million people in rural areas do not have access to superfast broadband (above 10Mbit/s).
- 48% of rural connections do not meet the superfast speed, “leaving ordinary people and businesses lagging behind the rest of the country”.
- Over 400,000 of SMEs do not have access to superfast broadband.
- Poor internet connections are costing the UK economy up to £11 billion per year.
- 42% of SMEs report experiencing problems with their internet connectivity, and 29% also report poor service reliability.
- There is a huge regional variation in the quality of broadband, with areas in the South West and North of England, Scotland and Wales experiencing particularly poor service.
The worst areas for broadband in the UK
To see the 71 worst areas for ‘superfast’ broadband in the UK, read our list.
The role of BT and Openreach
The report explains that Openreach is a wholly owned subsidiary of BT, which currently “maintains and owns the main system of cables that connects virtually every home and business in the UK to broadband services”.
It goes on to outline Outreach’s history of under-delivering on promises, along with the fact that the company has historically generated the majority of BT’s profits. It also demonstrates that BT operates a monopoly system, with competitors such as Sky forced to pay a wholesale price to BT in order to use the network.
Consequently, the report argues, Openreach has little incentive to upgrade their service and in particular to switch the outdated, slow copper network to fibre. In fact, they have little incentive to act at all: “Openreach generates 50p in earnings before interest, tax, depreciation and amortisation for every £1 of revenue….This effectively means the UK taxpayer is subsidising BT owned infrastructure through Openreach that they will then profit from.”
“This report believes that formally separating BT and Openreach into two fully separate companies would be of immense value to the
UK digital economy.”
The report suggests that, because BT has an effective monopoly, the time as come to sever the connection between BT and Openreach. This will increase competition and provide incentives for upgrading the copper network.
Although BT is stressing the benefits of their alternative to fibre, the G.Fast solution which is designed to get better performance from copper cables, the report dismisses this as as not radical enough to tackle the severe inequalities in UK broadband speeds.
As the report concludes:
“Unless BT and Openreach are formally separated to become two entirely independent companies little will change. They will continue to paper over gaping cracks. Whilst rural SMEs and consumers are left with dire speeds, or even no service at all, Openreach makes vast profits and finds little reason to invest in the network, install new lines or even fix faults in a properly timely manner. The time has come for a bold and comprehensive solution, full separation and deregulation will provide that solution.”
Openreach is due to publish a report on its service shortly. In a meantime, read the full BIG document on Grant Shapps’ website.