Rural areas to escape from digital slow lane
Good news is on the way for Britons stuck in the digital slow lane. As soon as Thursday, the Government is expected to announce a deal with BT’S network subsidiary, Openreach, to upgrade around 1.4m rural broadband lines. This covers most of the 5pc of homes and businesses that cannot access decent speeds of 10 megabits per second.
There’s an extent to which Openreach has the Government over a barrel when it comes to the financial details. Theresa May’s weak minority administration has little appetite or capacity for more legislation to force the company to invest, so is reliant on making a deal.
Openreach knows that when it comes to connecting Britain’s most remote homes and businesses, it is the only show in town.
Thus, what has hitherto been referred to as the broadband Universal Service Obligation will become the rather less onerous-sounding Universal Broadband Commitment.
Openreach is not demanding subsidies. Previously, taxpayers put up £1.7bn to lay fibre optics between local exchanges and roadside cabinets in over a quarter of the country, where BT said it was not commercially viable. For the unfortunates still reliant on copper wires all the way to their exchange, Openreach says it will front the cash for upgrades itself.
The change partly reflects strongerthan-expected demand for better broadband. At the last count, £446m was due to be returned by BT to local authorities because take-up of faster internet services has beaten forecasts. Openreach can be confident that upgraded lines will be well used.
It is not offering to spend hundreds of millions of pounds for nothing, however. As Openreach sees it, the costs of providing decent broadband to rural Britain should be borne by consumers in the rest of the country. It wants the price of upgrades to be factored into an ongoing Ofcom debate over the charges it is allowed to make for wholesale broadband.
That would mean BT, Sky and Talktalk customers across the entire country would ultimately foot the bill. Vodafone claims this would cost between £11 and £20 per year per household. In broad terms, this seems sensible. Yet there are dangers for ministers desperate to show that the Government can still achieve things. Openreach, which is attempting to rebuild its relationships with customers, also needs to be careful.
It should not conflate the Universal Broadband Commitment with other arguments around wholesale broadband pricing, for instance.
Ofcom wants to introduce a new price cap on superfast broadband. Those plans are questionable given the urgent need to further upgrade Britain’s digital infrastructure. Yet any claim by Openreach that the Universal Broadband Commitment is threatened by them would risk damaging its efforts to build trust with Talktalk and Sky. The issues are separate.
The Government, meanwhile, needs to ensure mistakes made when it subsidised upgrades are not repeated.
A report from Vodafone points out that neither taxpayers, nor the industry, have a clear idea of what BT built on their behalf and at what cost. BT’S own contribution has not been disclosed properly and was probably less than it should have been. Basic financial transparency was neglected, stoking suspicions of a cosy arrangement that unfairly benefited a monopoly.
Between them, Openreach, the Government and Ofcom must deliver a better deal for everyone this time.
‘Openreach, Government and Ofcom must deliver a better deal for everyone this time’
Paysafe? I’d say play it safe
You can’t blame Paysafe shareholders for raising an eyebrow when CVC and Blackstone came knocking with a £2.9bn offer last Friday. Buyout firms normally look for bargains, yet following the £9bn sale of Worldpay, payments providers are more expensive than ever. Given Paysafe bosses are in line for a £70m payday, shareholders may wonder if they are being bounced into a cheap sale.
In fairness, the board, advised by Lazard, have not recommended the offer, which is at a modest premium. It remains possible that a deep-pocketed trade buyer could be tempted to emerge with a counter bid.
But it is understandable why the biggest shareholder, Old Mutual, has backed a sale. Paysafe is not as safe a bet as Worldpay. Its customer base is concentrated and risky.
Former payments star Monitise yesterday offered a timely reminder of what can go wrong. Once valued at more than £1bn, its sale for just £70m now looks in doubt. Paysafe investors might be best to play it safe and cash in.