11 Comments

• Stuart Mitchell 2nd Jun '12 - 12:38pm

  Graham Jones is right. The government should not be spending a penny on this, for two reasons: (1) It represents a very poor return on investment at a time of austerity. The money would be better spent elsewhere. (2) Telecommunications companies rake in huge amounts of profit. BT made £2.4bn last year, Vodafone £9.5bn (and avoided tax on a large part of it). Let THEM pay for it.

• Daniel Cassidy 2nd Jun '12 - 1:27pm

  I don’t really see this logic that city dwellers should be expected to subsidise the higher utility costs incurred by rural folk.

  Since I live in a city, I have to suffer cramped, inadequate and incredibly expensive accommodation and a generally high cost of living. But I also have lightning fast Internet and fantastically easy access to a wide range of local businesses and services. I long ago weighed up my options and decided that was the best balance for me – I’m more than willing to put up with the bad points in order to take advantage of the good.

  I expect that people who live in the countryside have made a similar set of judgements, but have started from a different set of priorities, and consequently come to a completely different conclusion. And that’s exactly as it should be.

  I don’t expect them to subsidise my cost of living and I don’t really see why I should have to subsidise theirs.

• Andrew Suffield 2nd Jun '12 - 4:07pm

  Telecommunications companies rake in huge amounts of profit. BT made £2.4bn last year, Vodafone £9.5bn (and avoided tax on a large part of it). Let THEM pay for it.

  They are paying for it. You are displaying a level of financial ignorance usually seen only in the Daily Mail. I do not think that you understand what profits are.

  Profit is the company’s income for the year minus the costs of generating that income (salary, materials, tax, etc). Profit is not evil or wrong, nor is it the private income of wealthy people. Profits are the investment fund that the company spends on expanding their business and building up their infrastructure. You’re demanding they pay for this: that is a large chunk of what that “profit” figure represents. You’re looking at the wrong numbers.

  BT made £2.4bn last year. Of that, £560m or so was disbursed to shareholders – the bulk of which are investment funds which in turn are your pension (the money you plan to retire on doesn’t come from nowhere). The remaining £1.9bn stayed in the company, which means it’s being invested somewhere. Every time BT hooks up another town to the modern broadband network, that’s this £1.9bn being spent. Of course, their business contains a lot more than residential broadband, and the investment capital gets distributed between all of it.

  Rural broadband loses money. The government can’t expect BT to cover the entire bill just because it’s good for society. It is the LD party’s position that internet access is an important part of society and people should have access to it even if their parents want to live in a rural area. BT and the other telecomms companies are still going to pay for most of it – just not all of it.

• Richard Shaw 2nd Jun '12 - 4:45pm

  @ Daniel Cassidy

  “Since I live in a city, I have to suffer cramped, inadequate and incredibly expensive accommodation and a generally high cost of living.”

  Have you considered the possibility that if you supply broadband to rural areas people would have less reason to move to cities in order to access services or engage in business activities? You might be less cramped and have cheaper accommodation as a result.

  “I don’t expect them to subsidise my cost of living and I don’t really see why I should have to subsidise theirs.”

  Unfortunately, they probably do subsidise you as taxes aren’t based on location or how much public investment there is in an area. For example, rural road users pay the same road tax as urban users even though most road infrastructure spending is in and around urban areas, benefiting only urban residents and businesses. One day we might have land or site value taxation which would free you (and rural residents) of funding infrastructure which does not directly benefit them as the capital investment would be reclaimed from the increased value of the land any new infrastructure serves and benefits. Until then…

• Tim Leunig 2nd Jun '12 - 9:15pm

  Richard – rural roads are definitely subsidised by urban folk – the number of cars driven on them and thus the tax collected is very low. I also struggle to see the basis for the broadband cross subsidy. Rural areas don’t subsidise the cost of insurance for inner city businesses.

• Ian Sanderson (RM3) 3rd Jun '12 - 10:40am

  Perhaps the MP should have said “subsidising internet shopping for OAPs who can’t afford to spend all day hanging around their local town waiting for a bus back home”! He presumably can’t remember ever having to struggle with an internet connection too poor to send emails or do shopping. Rural internet also allows local businesses,including farms to be more efficient, helping with unemployment.
  I agree big telecom should be putting more investment into this, but British company law requires them to only look after their investors. It needs a government stick or carrot.
  As for the urban dweller saying “I don’t want to subsidise these people in the boondocks”, remember the alternative is having more of them coming to live where you live, putting up your costs!

• Simon Banks 3rd Jun '12 - 11:02am

  The question of how urban areas subsidise rural is a serious and complex one, but there are some counter-arguments: for example, pockets of rural deprivation, which can be pretty bad, are too dispersed and small to get specific help while quite rightly tax from prosperous people living in suburbs or the country subsidise action against urban deprivation.

  Graham Jones was gratuitously inaccurate and offensive in his comments. Many rural people are not rich and broadband access supports not only internet shopping but a full life for isolated retired people, diversification for struggling farms and the existence of small rural businesses. If these are forced to move to towns and cities, commuting and urban congestion will increase with impact on the carbon footprint.

  This there is a legitimate public interest. However, it might be more liberal for the subsidy decisions to be made at regional or even county level. Even Devon, for example, has urban areas and a fair number of prosperous people; and those areas that would clearly lose (Cornwall, the Western Isles) could benefit through mechanisms to support local government expenditure by poorer areas and then make their own decisions about what to spend the money on.

• Stuart Mitchell 3rd Jun '12 - 11:08am

  @Andrew said :-

  “You are displaying a level of financial ignorance usually seen only in the Daily Mail. I do not think that you understand what profits are.”

  But then he said this :-

  “BT made £2.4bn last year. Of that, £560m or so was disbursed to shareholders… The remaining £1.9bn stayed in the company, which means it’s being invested somewhere.”

  Uh-oh! The remaining £1.9bn certainly does NOT all get “invested”, in rural broadband or anything else. For a start, some of it will be paid in tax. Some may be used just to increase reserves. There are numerous things BT can and will use the money for other than capital investment. In fact, there is no guarantee that any of that money at all will be used to increase investment in infrastructure – the fact that BT were able to boost profits by 42% last year despite falling revenues suggests that they are not over-stretching themselves in the investment department.

  Not sure where the stuff about profit being “evil” or BT not investing anything at all in infrastructure came from. I never suggested anything remotely like that.

  The fact is, is that BT is raking in billions more than it is spending. On the other hand, the government – as defenders of coalition cuts always like to tell us – has no money at all. It is perfectly valid to question why the government is handing out these kinds of subsidies to super-profitable private companies. If BT’s rural customers are unhappy with their service then they should be complaining to BT, not the government. Have these people forgotten that BT was privatised in 1984?

  In your last comment you seem to be acknowledging that a privately owned and highly profitable telecoms industry is not much cop, if left to its own devices, at providing the kind of network that society needs. On that point, I agree, but what the government is doing is not the answer,

• Stuart Mitchell 3rd Jun '12 - 11:26am

  Ian: “I agree big telecom should be putting more investment into this, but British company law requires them to only look after their investors. It needs a government stick or carrot.”

  Agreed. What I personally think should happen (WARNING – SOCIALIST SENTIMENTS ABOUT TO BE EXPRESSED) is that all the utilities that are natural monopolies should be publicly owned and run for the public good. I realise the former will never happen again but that doesn’t mean we can’t insist on the latter – that is, require these companies to provide a reasonable level of service to all of their customers, wherever they may live. The service need not be uniform, and it may be appropriate to charge some people more than others. But all of this should be fair and reasonable and subject to strict regulation. Simply throwing a big wad of public cash at BT now and then when there is a gap in provision is not the best answer.

• Ruwan Uduwerage-Perera 3rd Jun '12 - 1:20pm

  The Liberal Democrat Party is in danger of appearing as supporting ‘Urban elitistism’ if they oppose this. Rural depravation is very real, and needs to be countered as much as urban issues, for the rural vulnerable communities are often even more voiceless, as their concerns are drowned out by the landed and minority NIMBY fraternity.

• Andrew Suffield 6th Jun '12 - 2:04am

  For a start, some of it will be paid in tax.

  I’m pretty sure that number is profit after tax.

  In your last comment you seem to be acknowledging that a privately owned and highly profitable telecoms industry is not much cop, if left to its own devices, at providing the kind of network that society needs.

  It’s not that bad. The problem is what’s called “last mile” – the industry will, left to itself, build out everything but the last 1 mile or so of cabling to low-density houses. Everything else is profitable in its own right. That last bit isn’t. That’s why most of the network is funded through private investment.

  In fact, there is no guarantee that any of that money at all will be used to increase investment in infrastructure

  True, but it will be used on something relating to growing the business, and BT is investing substantially in infrastructure (they just don’t publish the exact figure for that). They are quite enthusiastic about building everything up to the last mile.

  What I personally think should happen (WARNING – SOCIALIST SENTIMENTS ABOUT TO BE EXPRESSED) is that all the utilities that are natural monopolies should be publicly owned and run for the public good.

  Which is an interesting and compelling proposal, but it’s irrelevant to this discussion because internet access infrastructure isn’t a natural monopoly. Right now there’s three or four companies competing for it in the UK, and in some sillier parts of recent history there were hundreds.

  Natural monopolies are things which are, in the long term, only cost-efficient if run by a single provider. Internet infrastructure has no long-term cost disadvantages to competition. The only barrier to competition is the up-front investment required to build out the network. It is a coincidence of history that we ever had a monopoly in this infrastructure, and for most of the population, we no longer do.