Home Economics Why We Shouldn't Subsidise Broadband Rollout

Why We Shouldn’t Subsidise Broadband Rollout

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This is one of those numbers that is going to be so misunderstood. Or perhaps so misused. It turns out that having broadband lined into a house makes the house more valuable. How cool is that, eh? It means that we don’t need to subsidise the rollout of broadband for the people who get it gain the benefit and so they can pay for it themselves.

Of course, this is going to be used the other way around, as an insistence that we all should pay taxes in order to increase the value of other peoples’ houses:

A superfast broadband connection adds up to £3,500 to the value of a home, a Government-funded study has found.

The report by Ipsos Mori concluded that upgrading a home’s internet could increase its value by over one per cent in the post-pandemic era of remote working.

It comes as ministers have pledged to roll out gigabit-capable broadband to 85 per cent of the country by 2025.

However, industry figures warned that ministers’ decision in the autumn statement to only release one third of the £5 billion promised to the telecoms industry for upgrades would mean that rural and remote areas would go to the “back of the queue” for internet upgrades.

The report, which was commissioned by the Department for Digital, Culture, Media and Sport, found that upgrading to superfast broadband, which is at least 30mbps fast, added on average between £1,700 and £3,500 to the price of a home.

30 mbps is something we can manage with ASDL these days, we don’t need fibre to the door. But that will be ignored too.

So, think on it. The rise in the house price is the capital value of the services to be gained from broadband. That’s thus the maximum that someone should be willing to pay in order to gain that broadband. Fine – which means that people will pay some goodly portion of that sum to gain the broadband. So connectivity for most is dealt with.

We can also look at this the other way around. A major part of the value of the Jubilee Line extension went to the landlords at Canary Wharf. So, said landlords chipped in to pay for the extension. The Battersea extension of the Northern Line was just financed in the same way. And near the entirety of Hong Kong’s metro is financed that way, by collecting the uplift in land values from the provision of the services.

So, we’ve a capital uplift from the provision of broadband, that can be used to pay for the provision of broadband.

True, there will be those isolated places where the cost is higher than the uplift. But that’s just telling us that spending the money isn’t worth it, because the cost of provision is greater than the value created.

The sadness here being that of course we know how this number is going to be used. Everyone should pay more taxes in order to increase the value of other peoples’ houses.

Anglo Saxon Wave time, eh?

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12 COMMENTS

  1. “remote areas would go to the “back of the queue” for internet upgrades.”

    Remote areas are slow to get infrastructure Because. They. Are. Remote.

    Yea gods, somebody’s had a brain bypass here.

  2. Note the first line “up to 3,500”, let’s use the high-end number only. I also would love to know if anyone who wasn’t already on board with this idea reviewed the “Government-funded study”.

  3. The most interesting part of the ultrafast broadband rollout is the use of fibre instead of copper. A close relative lives in a remoteish village (20 minutes drive from a large city) and theres no hope of getting adsl. I think he had it for a while with a stonking 2Mb download speed. However, the new fibre technology is ridiculously cheap, does some optical magic so the box on the top of the pole does not need any power and can run for something like 60km over a single cable. That means he should be able to get 300Mb+ for not a super amount of money in the near future.
    Unfortunately, the policy to accelarate rural broadband has granted a local monopoly to someone local and hes going to be stuck with a wifi antenna pointed at a farm on the next hill for the foreseeable future, so nobody is legally allowed to install this new technology, in order to protect the investment of someones old technology. Must have seemed like a good idea at the time…

  4. “back of the queue”

    Is this an argument that there shouldn’t be a queue? That all things should happen simultaneously. Seems at odds with our physical universe.

  5. Poor quality broadband is often unreliable as well as being slow. In very simplistic terms, xDSL is slow because of distance and errors. So it goes slower to try to be more reliable. Often this doesn’t work.

    Why is this important? Because, people might need to have Internet access to be able to interact with the government who are busy paring costs by pushing things online. If you are a farmer who needs to access a government portal to meet some bureaucratic requirement, it’s not unreasonable the same government subsidise your decent quality access.

    No, you won’t need 100 Mbps or Netflix, but you might want more than 256/64 kbps.

  6. At which point ( other than by political/PR definition ) is 30Mbps “superfast” ? It’s barebones average DSL speed. From the times people still had coal-fired modems and stuff.

    If having a barebones internet connection still increases the value of real estate, it says something about the state (or rather, lack of it) of broadband rollout and availability….

    • See Grikath above – superfast is the term used by the government to describe 30Mbps, and the target for OpenReach is x% of the population to receive that. And OpenReach might be doing a bit of jiggery pokery in the cabs/line cards to massage the numbers.

      They don’t seem to have defined a level for the backlink though, which probably got a lot more important over the last ten months or so.

  7. Is the up-tick in value due to actually having a “super fast” (however defined) connection in place, or just available – as in you could call-up and have one available shortly after you take possession? If the former – do connections survive a change in ownership? Here they don’t; a new owner has to contact an ISP and either establish a new account, or move their existing account from their prior residence. If the latter, how did they deal with the confounding effect that “super-fast” connections are likely available in the 1) more densely populated areas anyway – which tend to be higher-value, anyway, an 2) in the higher-income areas where residents are more willing to pay for them, and are also willing to pay up to live in a nice area?

  8. Hang onna mo’

    UK average house price is £256,000.

    Value added by broadband is between “£1,700 and £3,500”.

    Or between 0.6% and 1.3%.

    Smells like bollocks to me.

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