21 October 2016
This article by Tom Mockridge, CEO of Virgin Media, was originally published in the Financial Times.
Theresa May, the prime minister, recently contrasted the failures of some in the private sector with the good that government can do. But what if government channelled the good that business can do?
Take the question of the UK’s digital future. At the recent Conservative party conference, Mrs May said the government will “take big, sometimes even controversial, decisions about our country’s infrastructure”. Is this a signal that it supports BT being forcibly divested of its engineering arm Openreach? I hope not. Stripping a private sector company of its assets would send a chilling message to investors — which is why, on this point, Virgin Media is aligned with its biggest competitor, BT.
Investment in competing broadband networks is something that successive governments and Ofcom, the telecoms industry regulator, have wanted. The problem with BT Openreach is that it has no network competition in more than half of the UK. Policy should be directed at fixing that.
Karen Bradley, the culture secretary, said in the House of Commons recently that “digital connectivity is as important as a connection to water”. But to connect a home or business, a “wayleave” is required. Wayleaves were introduced in the early 15th century, originally to cover the transporting of coal in Durham from the pit across church-owned land. Surprisingly, it is this antiquated rule that is proving to be one of the primary barriers to delivering better broadband in the UK.
To make a bad problem worse, wayleave rights are not granted equally. For example, water pipes run through every street and water companies are able to connect homes and businesses easily to those pipes. Telecoms companies face more red tape to gain access and then, assuming they do, face 150 per cent higher costs.
Worse still, telecoms companies are in very different positions to each other. BT, as the former state monopoly, is in all homes and businesses whereas Virgin Media and other competitors investing in infrastructure require a wayleave agreement for every new home or business they connect.
If you are trying to reach 4m new premises, the case for reform is clear. Put simply, telecoms companies need the same access rights as those enjoyed by water companies — or, at the very least, parity with BT. Only then will investors in broadband infrastructure compete on a level playing field to the benefit of customers.
Too often in the past the wheels of government have turned too slowly and reform has lacked ambition. But sometimes policy is simply muddled.
Philip Hammond, the chancellor, this month promised that it would be “long-term economics, not short-term politics, that drives Britain’s infrastructure investment”. This was intended to be a reassuring message. Yet a few days earlier, the Valuation Office Agency, an arm of government, had published new business rates that could lead to an increase for investors in the broadband network infrastructure of about 300 per cent. This compares with a 16 per cent increase for water companies.
On the one hand, this direct tax is applied to those investing in the broadband infrastructure that the UK badly needs. Virgin Media, for example, is building an ultrafast network which will include fibre connected directly to the premises.
On the other, the government plans to provide yet another £500m on top of the £1.2bn subsidy it has already given, almost entirely to BT, to spend on modernising its copper broadband, with all its technical limitations. Is this really the best use of scarce public funds?
Improving infrastructure is vital to securing the UK’s future economic growth. With the will to cut through a tangle of red tape, government will truly be able to channel the enormous good that business can do.