UK Labour’s nationalized broadband election bid is seemingly free of logic

Source:Global Times Published: 2019/11/18 19:38:39

A city view of London Photo: VCG



"British Broadband" is a catchy alliterative title, but that's about all. The opposition Labour party on Thursday announced it wants to nationalize telecoms provider BT's network in order to give everyone speedy fiber connections. State ownership might fix the country's lagging communications infrastructure, but the promise of free web surfing risks condemning the idea to previous failed experiments in public ownership like British Coal or carmaker British Leyland.

Labour leader Jeremy Corbyn's proposal drags Britain's relatively poor levels of connectivity into the heart of the December 12 election. BT's fiber network currently reaches just 1.6 million homes, 9 percent of the total and way behind Spain and France. The company could crank up investment, but needs to provide a return to shareholders. Nationalizing BT's Openreach network would allow the state to complete the task.

That's an expensive proposition, though. Openreach earned 2.4 billion pounds ($3.1 billion) of EBITDA in the year to March. Valued at the 5 times multiple investors currently attach to the whole of BT, buying it back might cost taxpayers 12 billion pounds. Labour reckons extending the fiber network to 18 million homes would cost an additional 20 billion pounds. BT Chief Executive Philip Jansen says the bill would be twice as high.

But Labour is taking the idea further by promising to provide fiber broadband to the entire population free of charge. That cranks up the costs. Labour estimates the cost of running the fiber network at just 230 million pounds a year. Fiber is cheaper to maintain than old copper networks but that's still hard to square with Openreach's annual operating expenses of about 2.6 billion pounds.

To pay for the giveaway, Labour wants to tax multinationals like Amazon according to their presence in the UK, rather than on the earnings they report locally. How much this would raise is unclear. So is the question of compensating rival UK broadband providers like Liberty Global and Comcast-owned Sky, whose businesses would presumably be wiped out.

Opinion polls suggest Labour's chances of forming a government that could implement the plan are slim. This helps explain the less than 2 percent drop in BT shares on Friday morning. British politics could do with a healthy debate about its broadband needs. Unfortunately, the unbaked idea of free internet for all undermines that discussion.

The author is Ed Cropley, Reuters Breakingviews columnist. The article was first published on Reuters Breakingviews. bizopinion@globaltimes.com.cn

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