U.K. Government Raids BBC Money to Finance Rural Super-Fast Broadband

LONDON, October 25, 2010 – The U.K. government has decided to tap into the BBC’s income to help pay the estimated $1.35 billion cost of deploying super-fast broadband to some rural parts of the country over the next seven years.

In this way, the government avoided reneging on earlier promises to extend broadband to remote areas as part of its draconian $135 billion public spending cuts announced Oct. 20.

The United Kingdom’s largest carrier, British Telecom, is investing $4 billion over five years to bring fiber to 17 million U.K. homes by 2015, while the country’s largest cable TV operator, Virgin Media, already reaches 12.7 million homes, mostly in  cities and towns, with its hybrid fiber/coaxial network capable of providing access at 50 megabits per second.

But this will still leave one third of homes beyond the reach of super fast broadband according to most definitions, relying on telephony grade copper for DSL services which in the case of 2 million homes will not even reach 2 Mbps. Definitions of super fast broadband vary, but most consider it should be at least 25 Mbps, sufficient to provide high-speed internet alongside several channels of high definition TV.

It is sometimes defined as meaning fiber to the home (FTTH), particularly for rural locations at least several miles from the nearest telephone exchange where it is hard to deliver ultra high speeds over copper. FTTH is capable of real world speeds of 50 Mbps or more and potentially as high as 10 gigabits per second with a technology known as PON, or Passive Optical Network transmission.

But countries around the world with significant rural populations have been struggling to find viable economic models for building out fiber, and the United Kingdom originally settled on a $10 annual tax on all landline telephone subscribers, but this was scrapped with the change of government in May.

Now the current coalition government has decided to take $500 million over the next five years from its annual payment to the BBC, the country’s public service broadcaster, funded directly by an annual $240 license fee levied on every U.K. household with at least one TV set. This will be topped up by a further $400 million left over from a provision to convert the country to digital TV. Chancellor George Osborne, minister in charge of the country’s finances, said a further $500 million might be required by 2017.

The initial pot of money will be spent on four major rural broadband pilot projects in the Scottish Highlands, North Yorkshire, Cumbria and Herefordshire. This will still leave other parts of the country waiting for high speed broadband until the second half of the next decade, so the total cost will rise to well over $1.6 billion.

The move was welcomed by the rural areas involved in the project. “I have long argued that a first class broadband system is key to business growth and development in my region and especially in the remote rural and island communities of this part of the world which can be at a disadvantage due to peripherality and distance from markets,” said Jamie McGrigor, Highlands & Islands Conservative member of the Scottish Parliament. “I am delighted with this news which is a real boost for the whole of the Highlands & Islands.”

Chancellor Osborne indicated that the trials had been spared the spending ax because consistent access to high speed broadband was vital across the whole country at a time when businesses were becoming more distributed and no longer concentrated entirely in cities. “It will help encourage the growth of our creative industries as a key part of the new economy we are seeking to build,” Osborne said.