This report by Rob Kenny, Communications Chambers, looks at the costs and benefits of 'fibre to the home' (FTTH) in the UK, exploring the argument that that the UK government should intervene to encourage nationwide FTTH infrastructure.

As a result of both purely commercial roll–outs and government intervention, by 2015 95 per cent of the UK will have access to ‘fibre to the cabinet’ (FTTC) broadband, providing average speed of 42 Mbps. Virgin’s cable network offers even higher speeds to 50 per cent of the country today, and this is set to increase to two–thirds. However, a number of countries, particularly in East Asia, have built out ‘fibre to the home’ (FTTH) networks which can deliver speeds of 1 Gbps or more. There are now approximately 130 million FTTH connections worldwide. Some argue that the UK government should intervene to encourage nationwide FTTH here.

One challenge in making this case is that, to date, there is little evidence on the benefits of FTTH over FTTC, and in particular of the public benefits which might justify market intervention. This may conceivably be because it is too early for such benefits to have materialised. But the result is that the case for public investment in FTTH has to be on more speculative grounds – for example, based on the possibility of a new killer application requiring speeds only FTTH provides (one version of the ‘future proof’ argument), or on non–economic grounds altogether.

Decisions about broadband infrastructure are not ‘for the ages’ – rather they sit in a dynamic environment with irreversible investments and great uncertainties about new access technologies and new applications. This suggests that the optimal ‘future proof’ strategy may actually be one of strong ‘watching brief’, to monitor for developing opportunities.

Policymakers need to consider:

• research into the usage patterns of households moving to higher speed connections, to understand if this results in changed behaviour and in particular increased usage of applications with positive externalities
• investigation of the applications in use in countries with widespread FTTH, to see if that investment has paid national dividends 
• demonstrators, perhaps focused on areas of the UK which already have material FTTH or creative and digital clusters where businesses are arguably best placed to exploit high speeds, to see if there is the opportunity for business and civic applications built on this infrastructure
• one or more national laboratories, similar to Australia’s Institute for a Broadband Enabled Society, focused on socially valuable applications of a higher speed internet which might not be purely commercially justifiable.