As part of their election manifesto, Labour have pledged that they will nationalise Openreach, who maintain most of the UK’s communications infrastructure, and provide full-fibre broadband to every UK home and business, for free. The project will be financed by a tax on large tech companies and is estimated to cost around £20bn.
As well as being an eye-catching promise, hoping to persuade swing voters to side with Jeremy Corbyn, this announcement has caught many businesses off guard. BT’s share price fell sharply shortly after, and at the time of writing, the announcement has also put on hold the sale of Talk Talk-owned FibreNation to CityFibre Holdings.
As you’d expect, the Conservatives have slammed Labour’s ideas as “fantasy”, and there is widespread scepticism within the telecommunications community and the wider business ecosystem.
What’s the motive behind Labour’s pledge?
It’s clear that we need to get more small businesses connected to fast, reliable broadband. These connections don’t just help high-tech firms, they give all kinds of fledgling and established businesses the best possible opportunities to grow, particularly outside of major urban centres like London.
As a telecoms provider based in Bath with SME customers around the country, we are very keenly aware of this. The creation of high-speed, reliable connectivity opened up entire industries within telephony itself: VoIP phone systems and SIP Trunking. These systems were fundamental shifts in how we communicate, changing how we talk to each other from using 1980’s era technology to future-proofed internet connectivity.
Without the modern internet connections to back these platforms, this simply wouldn’t have been possible, and the many companies like ours that provide thousands of jobs and millions in tax revenue would not have thrived. These are not giant corporates, these are often founder-run and regional SMEs based all over the country, from the 130+ internet service providers represented by ISPA to the 100+ VoIP phone specialists represented by ITSPA.
What does this mean for Telecoms businesses?
There are obviously huge question marks about what happens to the alternative broadband networks, like Virgin Media, CityFibre, Truespeed and Hyperoptic. How will they be able to compete with a free, Openreach-provided FTTP connection? Like many others, our connectivity products rely on the Openreach network, and this new announcement calls into question this whole area of our business.
Labour’s plans to nationalise Openreach could have far-reaching and damaging effects on not just our business ecosystem, but the ability of the UK to roll-out full-fibre broadband, and future business productivity. Time and time again, private sector investment has outperformed publicly-funded schemes, particularly on a national level. It is hard to believe that a nationalised Openreach would deliver full-fibre broadband to every home and business faster than a private organisation.
What is clear is that there needs to be a full consultation with businesses like ours to fully understand the effect of these plans on our sector and the wider UK PLC. When a party makes a manifesto promise before this has been completed, there could be uncertain times ahead for UK telecoms.