Labour plan to nationalise BT Openreach and provide 'free' fibre broadband for all

TalkTalk pulls sale of FibreNation business and BT shares fall following new Labour giveaway offer

The Labour Party has pledged to nationalise Openreach, the tightly regulated infrastructure arm of BT, and offer ‘free' fibre broadband to every household by 2030 should it win the general election next month.

The plan would involve rolling out free fibre to between 15 and 18 million premises within the next five years.

The plan, revealed overnight, would also involve nationalising BT Enterprise, BT Consumer and parts of BT Technology. The three entities would be combined to form a new government-owned company called British Broadband, which itself would consist of British Digital Infrastructure (BDI) and British Broadband Service (BBS).

The on-costs, the roll-out, the service… will be covered by a tax on multinational companies on a fair basis

EE, Plusnet, BT Global Services and BT TV - all currently owned by BT - would remain in private hands.

However, it's not clear whether private ISPs would be able to continue with their current arrangements, whereby the regulator ensures they have access to Openreach infrastructure at regulated prices to provide services to customers. They would also face the challenge of competing against a ‘free' service.

I can't believe they consulted with anyone in the industry over this proposal. It is almost certainly not actually practical

Companies like Virgin Media, KCom and CityFibre would also almost certainly be affected by the pledge, should Labour form the next government.

The Party has also pledged, therefore, to offer current workers in broadband infrastructure and retail employment in British Broadband at their current or better terms and conditions.

Shadow chancellor John McDonnell claimed that the £22bn policy would be paid for by higher taxes on multinational businesses such as Google, Facebook and Amazon, as well as the top five per cent of earners.

"Twenty billion pounds in terms of the infrastructure roll-out… [That] figure is from an independent study commissioned by… the Conservative government," said McDonnell in an interview on Sky News this morning. This would be paid for via borrowing, he added.

"We then ensure that the on-costs, the roll-out, the service… will be covered by a tax on multinational companies on a fair basis. That will enable us to cover the on-costs."

McDonnell also asserted that the cost of maintaining the network would weigh-in at just £230 million against Openreach's own annual charges against households that come-in at £2.2 billion. "That is pure maintenance. The income that was previously acquired by BT… will be covered by the tax we will have on multinationals."

However, McDonnell suggested this morning that, in addition to guaranteeing the jobs, terms and conditions of people working across the telecoms sector affected by such a policy, a Labour government might also nationalise Virgin, Sky and TalkTalk - even though nationalisation of BT-owned Plusnet and EE, which includes EE Broadband, was ruled out.

Ofcom and the government have already pushed BT Openreach into a plan to install fibre networks across the country, with Conservative Party leader Boris Johnson bringing forward the target date to 2025 when he became Prime Minister earlier this year. Johnson described the Labour pledge as "a crackpot scheme", while BT CEO Philip Jansen warned that Labour had underestimated the cost of its latest pledge.

Likewise, figures across the industry haven't exactly welcomed the surprise proposal.

Adrian Kennard, managing director of the highly regarded Andrews & Arnold, told ISP Review that the idea made "very little sense".

He continued: "I can't believe they consulted with anyone in the industry over this proposal. It is almost certainly not actually practical. It would be hugely damaging to the ISP industry as a whole…

"Splitting BT up to nationalise some of it would also be a huge challenge - OFCOM have been working on that for a while. There are almost certainly many ways that far less money could be spent in a more effective way to improve internet access."

The free fibre broadband for all promise follows on from promises of a four-day working week with no loss in pay, the abolition of university tuition fees, six years of free adult education for all, and the nationalisations of Britain's energy suppliers, water companies, and Royal Mail.

In total, Labour's nationalisation plans alone - before Openreach was taken into considation - were costed at between £176 billion and £306 billion, according to the Centre for Policy Studies.