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By 2030, the most remote house on the Shetland Isles could have the same internet speed as the Shard in London, according to a new multi-billion pound plan announced by the Labour Party to part-nationalise BT.

Labour has proposed a Robin Hood-style tax, targeting big tech companies and using the money to subsidise broadband for some of the poorest-connected locations in the UK.


These areas would be served by a new state entity, called British Broadband, which would effectively take over from Openreach and force it to serve 100 per cent of the population, at a cost of £20 billion. The estimated savings per household could come to around £30 per month, Labour claims.

“The government will own the network that is rolled out, making it better planned, better coordinated, and able to reach everyone, including rural and remote communities,” said John McDonnell in an announcement on Thursday evening.

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Few were happy with the news. TechUK, a group which claims to represent the UK’s technology industry, labelled the plans “a disaster for the telecoms sector”, and BT’s chairman warned that the move could cost £100bn. The market showed its disapproval. Shares in BT fell almost four per cent this morning on the news, but have since largely recovered.

Prime minister Boris Johnson was also quick to criticise the plans, telling the BBC that he would not pledge “some crackpot scheme that would involve many, many billions of taxpayers’ money nationalising a British business”.


Nicky Morgan, the Conservative culture secretary, claimed the new deal would kill competition in the telecoms sector and cost taxpayers billions of pounds. “Corbyn’s Labour are yet again overpromising something they cannot deliver effectively nationalising broadband – killing growth and competition,” she said on Twitter. As he became prime minister, Johnson promised there will be full-fibre broadband coverage by 2020. The pledge moved the deadline for full coverage forward by eight years, from 2025. However industry experts have criticised Johnson's plan for a lack of detail.

Yet the government’s own research directly contradicts this argument – and backs the case for state intervention in the broadband market. Government figures show that market competition in the broadband sector has largely failed.

Research commissioned by the Department for Digital, Culture, Media and Sport (DCMS) last year argued that current major providers are competing for a slice of just 75 per cent of the UK broadband market – and largely ignoring rural areas that they consider unprofitable.

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The report considered various scenarios, all involving some kind of government intervention or subsidy to achieve a successful full-fibre broadband rollout. One of the models touted was that of a national monopoly, which “could be expected to deliver a nationwide fibre network coverage, as the monopolist can cross-subsidise between profitable and unprofitable areas”.


Openreach was even identified as the best (and only) contender for the job, and advised against “competitive tendering”. In a similar way to Australia and Singapore, this model could deliver coverage at a lower cost than a model that relies more heavily on the private sector, analysts argued.

There is not yet any clarity on how quickly a Labour government could gather the money – let alone how long it would take to physically bring fibre to the premises to these remote regions. And that’s without factoring a change in corporate tax regime, and the potential fallout with other countries within the European Union as well as the US.

But Johnson’s plan for broadband is no more clear. The current government has committed to delivering ultrafast “full fibre” broadband to ten million UK premises by 2022, then 15 million premises by 2025 and nationwide coverage by 2033. Yet earlier this year, he claimed that he would deliver full fibre broadband to “every home in the land”. How that will happen, no one yet knows.

The true danger is that this new plan will put a spanner in the works of current fibre broadband plans, and make any future progress more sluggish, rather than speeding it up. It is private investment from the likes of BT, Virgin and Cityfibre that has driven connectivity across the UK, and they could give up or wind down their activity if they believe the government will dominate the space.

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This scenario was also outlined in the advice to the government, which would be a “significant departure” from the current approach. The report claims it will “reduce network competition, both now and in the future which is likely to have a negative impact on quality, choice and innovation.”

“They have a strong vision. But the idea of going back to a monopoly would require redesigning the institutional framework of the market, which won’t help if the goal is to get fast broadband for all in a short period of time,” says Paolo Gerli of Northumbria University. “It might be good to leverage what is in the market rather than try to implement a completely new system.”

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