Nature and Scale of the Problem

County Councils, local enterprise partnerships (LEPs) and consortia of local authorities are being encouraged to develop local broadband plans and bid into BDUK’s pot of £530m in this parliament (and £300m expected in the following two years) to provide next-generation access coverage in areas outside of those that are attractive to commercial players.

The two key problems with rolling out future-proofed next-generation broadband infrastructure are well understood: it’s an expensive process (though arguably far less expensive than other major infrastructure projects), and large scale providers like BT are only likely to deliver to around 60% of the population with no public subsidy. The divide between the ‘commercially viable’ and the unviable ‘Final Third’ has largely been determined by the investment policies of BT and to some extent Virgin Media.

Many of the key economic issues were discussed in the Analysys Mason report on ‘The Costs of Deploying Fibre-Based Next Generation Broadband Infrastructure' (BSG / Analysys-Mason, 2008). Based on a set of core assumptions relating to deployment costs, demand and other issues, it put the costs of FTTC to 90% at £5.5bn (later revised to £6bn), FTTH at £25-28bn (though a later revision that included significant cost reductions, particularly in civil engineering, suggested this could be reduced to approx £15bn). This approximates to £240 per premise for FTTC, and somewhere between £600 at the lower end and £1450 per premise for FTTH.

As with all research projects of this nature there are necessarily some big assumptions in the Analysys Mason report, particularly on issues of consumer and business demand, access to existing physical infrastructure and the costs of new civil infrastructure. As a rule of thumb it is assumed that around 70-80% of the costs of telecoms infrastructure lie in civil engineering.

Changing these assumptions – e.g. the demand profile, or costs associated with digging, will have a big impact on the viability of rural broadband schemes.

Local broadband plans have to take account of existing local provision and to map areas that are not likely to be covered by BT’s current plans. Further information on mapping services and demand is given in the Mapping section of the Knowledge Base (see 'The importance of good maps')..