Fund managers to help spur investment in 'full fibre' broadband in the UK

Technology and telecoms contracts expert Simon Colvin of Pinsent Masons, the law firm behind Out-Law.com, said the new Digital Infrastructure Investment Fund would help support providers of new alternative broadband technologies to bring their services to market and deliver fast and reliable broadband services across the UK.

Colvin said the fund will also be of interest to many local authorities.

"We are seeing significant opportunities in the local authority space and, having been present at the launch of the fund in Peterborough, it is clear that there will be a positive injection of investment for full fibre broadband for local businesses and communities," Colvin said.

The Treasury said it expects its £400m investment in the fund to "unlock over £1 billion of capital in the sector". It said the ambition for the new fund is that it will be "self-sufficient" by acting as a catalyst for private sector investment in new 'full fibre' networks. It said the government will obtain a "commercial return" on the investments made.

At the moment many of the broadband connections in the UK are reliant on "old copper wires" that in most cases are decades old and unable to provide the "reliability that people are increasingly looking for" from broadband services, Andrew Jones, exchequer secretary to the Treasury, said.

The Treasury said new 'full fibre' networks can deliver on customers' expectations in the digital age.

"Britain’s homes are mostly connected to the internet via underground copper wires to a green cabinet on the street," the Treasury said. "Full fibre networks seek to run fibre connections straight to the doors of customers’ homes or businesses, via laser light flashes through glass or plastic tubes, making broadband stronger and more consistent. Unlike broadband run through copper wires which can be degraded by distance or the number of people accessing the internet at any one time, full fibre networks are much more resilient."

However, despite the potential of ‘full fibre’, the Treasury said that businesses have to-date found it difficult to raise the finance necessary to deliver full fibre networks on a commercial scale due to "a lack of certainty around future demand". It said this has "held back alternative providers from entering the market" and impacted consumer choice and access to the "latest technology".

Under the new scheme, though, providers of full fibre technologies will be able to approach fund managers Amber Fund Management Limited and M&G Investments to seek support for planned investment in new networks.

Jones said: "[The fund managers will] not only be investing our money in companies installing fibre across the UK, with a view to getting us a good return. They’ll be using our investment to bring other private investors on board, who will match our investment on the same terms."

"The great news is that they’ve already managed to get a significant amount of private investment agreed, so that the fund can start straightaway. So we’re ready to hit the ground running," he said in a speech in Peterborough earlier this week.

UK chancellor Philip Hammond committed to set up the new Digital Infrastructure Investment Fund in his Autumn Statement in November 2016, although its origins can be traced back further to George Osborne's Autumn Statement and Spending Review announcement in 2015 when he was chancellor.

At that time the government said: "Competition between broadband providers supports the delivery of the fast and reliable broadband a modern, productive economy needs. Innovative approaches to supporting the market will help deliver ultrafast speeds to nearly all premises." 

The previous coalition government in office in the UK between 2010 and 2015 had said that "innovative financial and commercial models" could be used to encourage investment in telecoms infrastructure and help deliver 'ultrafast' broadband services to businesses and communities in the UK. It suggested mobile broadband technologies, alongside new and faster fixed-line internet service technologies, could be relied upon to achieve the ultrafast broadband goal.

Ultrafast broadband was deemed by the coalition government to mean internet speeds measuring at least 100 mbps.