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Thursday, June 13, 2024 | Back issues
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UK Labour Party Promises Free Broadband Service

The British Labour Party's latest plan for public ownership of big industries sent shivers through the telecom sector Friday with an electoral promise to nationalize part of the former phone monopoly BT to provide free fiber optic broadband.

LONDON (AP) — The British Labour Party's latest plan for public ownership of big industries sent shivers through the telecom sector Friday with an electoral promise to nationalize part of the former phone monopoly BT to provide free fiber optic broadband.

Labour Party leader Jeremy Corbyn, who outlined the plan during a speech before next month's election, described broadband as being “at the heart of Labour's plans to transform the future of our economy and society.”

The self-described socialist, who has announced plans to renationalize water companies and some rail lines, described it as an effort to help all parts of society.

"What was once a luxury is now an essential utility," Corbyn said. “That's why full-fiber broadband must be a public service, bringing communities together, with equal access, in an inclusive and connected society.”

Labour plans to nationalize BT's digital network, known as OpenReach, and the company's other broadband-related businesses. The value of the assets would be set by Parliament, with shareholders receiving compensation in the form of government bonds, Labour said in a statement. The project would be funded in part with a tax on multinational corporations, including Amazon, Facebook and Google.

Labour's plans to nationalize some industries are part of a bitter election campaign that has seen both major parties woo voters with promises to increase spending after a decade of budget austerity under Conservative governments. Britain is holding the Dec. 12 election because Prime Minister Boris Johnson wants to secure a majority in the House of Commons so he can take the U.K. out of the European Union by Jan. 31.

Johnson described Labour's broadband plan as a “crackpot scheme.’’

The telecommunications industry greeted the plan with dismay. TechUK, which represents British technology companies, called it fundamentally misguided.

"These proposals would be a disaster for the telecoms sector and the customers that it serves,’’ TechUK CEO Julian David said in a statement. “Renationalization would immediately halt the investment being driven not just by BT but the growing number of new and innovative companies that compete with BT.”

BT shares fell by as much as 3.7% to 188 pence in early Friday trading on the London Stock Exchange.

One rival, TalkTalk, said Friday that the sale of its full-fiber optic broadband business, FibreNation, has been put on hold because of the Labour announcement.

Shares in companies including National Grid, which operates the national power network, the Severn Trent water company, Royal Mail and rail franchise holders such as National Express and Go Ahead Group are already trading at a discount because of concerns they will be nationalized, according to Michael Hewson of CMC Markets, a derivatives dealer.

BT was surprised by the announcement because Labour recently assured the company that it was not a candidate for nationalization, Hewson said.

“With other companies also being told the same thing by the Labour Party, investors will no doubt be looking very carefully at other possible candidates for nationalization, and whether they need to be concerned,” he said.

BT’s competitors seized the opportunity to offer their view on their contribution to broadband delivery in the country.

James Lusher, Virgin Media's head of external communications, tweeted a .gif of a raccoon stealing food from a cat bowl captioned with the words: "This mine now."

In a more studied response, the company said that it had “pledged to bring next-generation gigabit broadband to half of the U.K., by the end of 2021.”

“With billions of pounds worth of private money invested in the U.K., Virgin Media continues to expand its network, providing competition and choice to consumers,” the company said. “Government policy has a role to play and can help to accelerate broadband deployment in a way that minimizes the level of public subsidy needed and provides the U.K. and consumers with incredible connectivity within a competitive market.”

Labour governments nationalized many industries after World War II, including railroads, coal, steel, energy suppliers and telecommunications, as Britain struggled to rebuild its economy. The Conservative government of Prime Minister Margaret Thatcher sold off most of those assets in the 1980s, claiming that large state-owned monopolies were inefficient and competition would provide better service at lower cost.

British Telecommunications, now known as BT, was privatized in 1984 when more than half its shares were sold to the public. The government sold its remaining shares in 1991 and 1993.

Categories / International, Politics, Technology

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