The affordability gap in Britain’s broadband market

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The Local Government Association (LGA) recently released a report detailing a distressing reality. Amid the ongoing cost-of-living crisis, the most deprived areas of the UK are being hit with another area of inequality — their broadband accessibility and affordability. Internet has a strong correlation to access to opportunities, as Guy Miller highlights in this article.

In an era where digital connectivity has become an essential part of daily life, the findings from the LGA’s recent report highlight a shocking reality: more deprived areas of England are 15 per cent less likely to be able to access fixed broadband compared to wealthier areas. Why is this the case?

The socioeconomic digital divide

First and foremost, it is essential to acknowledge that the digital divide is not solely a matter of socioeconomic disparities. There are various factors that contribute to the disparity in broadband access across the UK, such as the availability and quality of infrastructure, competition in the local market and the policies and regulations in place. However, as the report suggests, the cost of broadband is a significant barrier to access, and it is disproportionately affecting poorer households.

The higher cost of broadband in less affluent areas can be attributed to a combination of factors. Firstly, the cost of infrastructure deployment and maintenance is generally higher in areas with low population density and poor infrastructure. These areas aren’t commercially viable for broadband providers to expand their network into — the low population density makes it hard to achieve any return on investment.

Additionally, competition in the market is limited, as it is not economically feasible for many network operators to offer their services in these areas. As a result, the providers who do offer their services in these areas have little incentive to lower their prices.

Hull: a case study

Hull is consistently ranked in one of the top ten most deprived areas of the UK according to government data, and uniquely experiences the highest average broadband Fe out of anywhere in the UK. The reasons for this are a combination of those detailed above but predominantly caused by a distinct lack of competition in the market. But the lack of choice is not the main issue for Hull’s residents, it’s the aggressive price increases that this has caused.

Elsewhere in the UK the introduction of alternative networks or altnets, which are priced aggressively lower than the dominant provider in order to win customers, have driven prices down as established players have responded by lowering their own prices to defend their majority position. But historically in Hull, the fact that there has just been one provider has allowed prices to remain high, resulting in consumers paying more for their broadband than anywhere else in the UK, as recognised by Ofcom.

One of the typical hacks to save money on broadband is to take a bundled service, which is done by 79 per cent of UK households. But this is not available for Hull’s residents through the dominant provider, which makes a bad situation of unaffordability even worse. So, what is the solution?

The affordability solution

Whether it’s in Hull or nationwide, broadband needs to be available and accessible both physically and financially to every home and business across the UK. Internet access is synonymous with access to public services education job opportunities and socialising. Nowadays it really isn’t a nicety.

In Hull and the North of England, MS3 is working to directly lower the costs and keep broadband affordable. It does this by offering a much lower wholesale price to Internet service providers (ISPs), which in turn allows them to offer gigabit-speed full fibre broadband to customers at a lower price. The result is an average saving of £180 for Hull’s residents compared to a broadband package available from the incumbent.

But what about for those still struggling to afford it? A recent Citizens Advice survey revealed that uptake of social tariffs is sitting at just five per cent, with 4.3 million households missing out on savings. MS3 reduces the charge of social tariffs to its ISP partners to give them the margin to pass this saving onto customers. But this sentiment isn’t shared with all network operators. Every operator needs to ensure they are doing the most they can to support the UK’s most vulnerable.

Broadband affordability is a nation-wide challenge. While there are various factors that contribute to the disparity, the focus should be on solutions. Network operators connecting unconnected areas and encouraging social tariff adoption among those eligible is essential to ensuring affordable access for everyone regardless of socioeconomic status.