The Impact of a Broadband Universal Service Obligation in the UK

04/05/2017
Project
Client: Broadband Stakeholder Group
Author(s): Grant Forsyth, David Lewin, Sam Wood
Telecommunications

The total cost, number of premises connected and overall net-benefit to the country of a broadband USO for the UK are all sensitive to design choices such as download speed, cost threshold, assumed take-up rates and funding mechanism – so were the findings of Plum’s study for the Broadband Stakeholder Group (BSG).

The BSG is the UK government’s leading advisory group on broadband. It commissioned Plum to provide analysis and add to the evidence base on the best way that a Universal Service Obligation (USO) can positively contribute to the goal of universal good quality broadband. The report complements the technical advice produced by Ofcom for Government. The USO gives people “the legal right to request a [broadband] connection at minimum speed no matter where they live”.

Plum built a model to assess the cost of delivering a broadband USO and the number of premises passed and connected to the USO service under a range of design choices. These included broadband download speeds of 10Mbps and 30Mbps, data throughput allowance of 10GB to unlimited data per month, consumer take-up of the service ranging from 40% to 80%, and cost thresholds ranging from £1000 up to infinity (i.e. no threshold).

Plum estimated that, without any cost threshold constraints, it would cost £930 million to provide a 10 Mbps service to the eligible 500,000 premises in 2019. This would increase to £1400 million to deliver a 30 Mbps service to the eligible 1 million premises. This ‘universal service fund’ is very sensitive to the cost threshold: setting a lower cost threshold means a smaller fund, but also fewer premises passed.

The optimal cost threshold for the broadband USO will depend upon what economic benefit the government assigns to connecting an additional premise in the target area. Plum’s analysis suggests that the cost threshold which maximises net benefits to the UK is likely to lie between £1500 and £3000.

Plum drew upon the findings from the model to highlight six key issues for the Government to consider in designing the broadband USO.