Public investment in fibre (again)

I blogged a few days ago about the public-private partnership lined up to provide high-speed broadband fibre throughout Cornwall and the Scilly Isles.

A couple more details have come to light here [paywall may be involved], albeit in the context of a weekly review on which the detail is scant. Essentially, however, the additional detail is that the take-up of broadband is 12% higher in Cornwall and the Scilly Isles than in the rest of the UK, which means that the risk of the investment to BT is a lot lower than otherwise; and the second is the comment from the development manager of the Cornwall Development Company (which is also involved with the project) that there is pent-up demand for high-speed broadband links in rural areas because of their isolation.

If true, this would turn conventional wisdom somewhat on its head (and we should also remember here that incoming money has made Cornwall, while still isolated, an awful lot less of a rural backwater than it used to be, which does make the county a more complex proposition). Of course, it may not be true (and the CDC may well still be in hype mode). If it was true, however, then the £100/head of public money which is being used for the project would seem to be much less risky an investment in the sense that public authorities could have confidence that take-up would be high and that investment on this scale would seem to provide value. At the same time, this brings us a little closer to the ‘crowding out’ thesis of the right – i.e. that public investment would, in this situation, be more or less replacing private investment since it would be more likely that, where demand was likely to be high, the private sector would be more inclined to get involved.

We can probably discount this, on the evident fact that the private sector is not getting involved in fibre provision extending into the ‘final third’ (or, indeed, not even as far as this). Nevertheless, it does raise the suspicion that, if there is pent-up demand, not only is the economics of fibre in rural areas less tough than hitherto envisaged but also that the telcos may be withholding somewhat.

Intriguingly, the £100/head of public investment being provided by the ERDF indicates, if the Cornwall example is generalisable, that the 20.6m people in the ‘final third’ (on the basis of a UK population of some 61.8m) would cost £2.06bn in public finance as regards rolling out extensive fibre connections – almost exactly the £2bn that Steve Robertson, CEO of Openreach, had already indicated would be the public cost of achieving the government’s ambitions of having the best high-speed connections in Europe (or less, given that there is likely to be fewer than 20.6m people in the ‘final third’). This is an interesting comment, given that there is extensive fibre to the premises solutions envisaged in the Cornwall project, on what could be achieved with a relatively small amount of publicly-sourced finance.

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