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Rural broadband: fibre-to-the-premises is inefficient, says economist

Tuesday, September 16th 2014 by Hannah Langston

Delivering gigabit broadband connections directly into rural homes and businesses is not economically viable, according to a leading economist.

London School of Economics professor Gabriel Ahlfeldt criticised the current trend for broadband providers to offer speeds of up to 1,000Mbps direct to rural properties, a process known as fibre-to-the-premises (FTTP).

Highlighting research from his study into fast internet and the property market, Professor Ahlfeldt said: “A rollout of FTTP to all UK households is not necessarily economically efficient.

“In rural areas where demand for superfast broadband is relatively low, it would make economic sense to concentrate on the provision of fast and reliable, though not superfast, broadband.

“It is not clear that fibre would be the most appropriate technology in those areas.”

Professor Ahlfeldt told Cable.co.uk: “For the low density areas it turns out that the costs of fibre are very large compared to the consumer surplus. To pass the cost-benefit test we need technologies that are cheaper even if they are slower.

“Some people argue that mobile solutions can deliver decent speeds at relatively low cost in low density areas but we haven’t considered these alternative technologies explicitly in our research.”

A growing number of broadband providers are offering fibre-to-the-premises connections in remote parts of the country. Community broadband ISP Broadband for the Rural North (B4RN) told Cable.co.uk it costs on average £800 to connect customers to its pure fibre network.

Rural broadband provider Gigaclear said it typically costs between £600 and £800 to connect a property to fibre broadband.

Gigaclear sales and marketing director Joe Frost agreed with Professor Ahlfeldt that not all premises could be connected to fibre optic broadband: “Areas such as small hamlets, remote farmhouses or villages that are either too far from the national fibre backbone or too difficult to get to will have to rely on alternative technologies, such as satellite or fixed wireless.

“Mobile broadband, and in many cases even fixed wireless, generally is not suitable for these areas due to geographic issues such as hills and trees.

"We have proven our business model with our FTTP networks in rural communities where we allow communities to pre-order the service (without paying anything up front) in order to validate that there is sufficient demand - so we, as a company, ensure we only build in areas where there is demand.”

Christine Conder, founder member of B4RN, told Cable.co.uk alternative technologies such as wireless and mobile broadband are not viable: “If it were easier or cheaper we would have done that. When there is a lot of traffic the mobiles won't connect because all the cells are limited capacity.

“We have run Wi-Fi networks here since 2005, and yes they are cheaper to build, but expensive to maintain. It also is unreliable due to the number of bounces, if any lose their power the rest of the network is off.

“We have tried all the different ways, and as a community we decided to do it once and do it right, and that is with fibre."

The government’s broadband delivery UK (BDUK) programme aims to connect around five million rural homes to superfast broadband with new fibre cables laid by BT to local exchanges. A spokesperson for BT could not give a maximum cost for connecting a property to fibre because it depends on variables such as distances and topography.

The government has also allocated £10m to trial alternative broadband technologies such as mobile, satellite and wireless for bringing broadband to the 5% of the country which will still remain unconnected by the BDUK programme.

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