Broadband affordability in England and Wales: How uneven is the playing field?

Introduction

The Covid-19 pandemic has brought home the importance of broadband access like never before. Having good internet connection suddenly meant a difference between being able to work, learn, order medicine and other essential items online, talk to one’s doctor, and get respite from the stressful situation by accessing entertainment and culture from home, for example, and being deprived of all of these possibilities.

Being aware of these difficulties faced by thousands of people in this country, we decided to investigate broadband affordability in England and Wales.

There are various definitions of broadband affordability. In the UK, Ofcom states that ‘a price threshold no higher than £45 per month should be sufficient to ensure broadband is affordable.’[1]

Needless to say, this is not necessarily true for some households. So, another way to assess broadband affordability is to look how it varies across different areas of the country and how it is affected by a broader economic context, such as income and deprivation. Our aim for this analysis was to compare how much consumers have to pay to get the entry level (cheapest) broadband available where they live and how this entry level cost relates to the average household income in that area. We sought to identify the ‘broadband deprivation’ areas where broadband access costs are relatively higher and the choice of broadband providers is often lower compared to the other parts of the country.

We conducted our analysis at the level of LSOA (Lower Layer Super Output Area), a geographical unit used by the ONS to report small area statistics. Each LSOA contains between 400 and 1,200 households, so it is a small enough unit at the right level of granularity to reflect the differences even within the same cities, towns and rural areas. There are currently 34,753 LSOAs in England and Wales.

Methodology

For this analysis, we used residential broadband tariffs marketed by ISPs in May 2020. Broadband services with the lowest possible annual cost that a consumer can access in every LSOA, irrespectively of broadband technology, were the basis of our comparison[2].

As is common practice in the market, a lot of these tariffs were promotional – valid with 12/18/24 month contracts – but they reflect the reality that most households will sign up for a fixed term contract to get a better deal.

Our annual broadband cost includes phone line rental, where it is required. Installation, activation and equipment charges are also included, where applicable.

The lowest available broadband cost was calculated based on the presence of particular ISPs in the LSOA. In turn this was based on 2.1m speed tests conducted within 12 months to April 2020[3].

We had to make several assumptions about the providers capable of offering broadband both over copper and part-fibre networks. BT is phasing out its ADSL service, hence we estimated it to offer FTTC in every LSOA unless the speed tests came out with ADSL or FTTH. We also assumed that for other ISPs ADSL was available in all areas where speed tests returned FTTC or GFAST. An exception is Vodafone who have stopped selling ADSL so we assumed that it offered FTTC where speed test results pointed to ADSL speeds. All the assumptions applied to the state of play in May 2020.

The relative cost of broadband was calculated against the net annual household income before housing costs, reported by the ONS for the financial year ending 2018 (the latest available) at the MSOA level[4]. Since no income data is available at the LSOA level we assumed all LSOAs in the same MSOA had the same average household income.

Entry level cost of broadband and what consumers get for it

We found that as of May 2020, the lowest available annual cost of broadband contract varied from £175.95 (an ADSL package from Vispa) in some LSOAs to £345.87 (an FTTC package from BT) in others. The Vispa service offered up to 24Mbps download speed while BT’s FTTC package offered up to 36Mbps. Both services included unlimited data allowance.

Some entry level broadband services in other LSOAs, however, came not only with modest speeds but also with significant limitations on monthly data usage, with 5GB or 20GB data caps in some instances.

Table 1. The lowest cost broadband providers, speeds and data caps in different LSOAs (May 2020)


Broadband cost as a proportion of annual income

While the entry level cost of broadband in absolute numbers was more or less normally distributed, with £200-£250 annual cost available in the majority of LSOAs (73%), comparing it to the household income of a particular area reveals more pronounced differences between parts of the country. Households in the south west, north and east of England as well as in Wales would typically spend seven times more on entry level broadband services in terms of a proportion of their net annual income, compared to the ‘cheapest’ LSOAs (2.35% and 0.33% respectively).

Even within the same region, the differences can be pronounced. For example, in Leicester, which includes an LSOA where households spend the highest proportion of their annual income on the entry level broadband plan (2.35%), this figure was as low as 0.5% in some LSOAs. At the other end of the spectrum, in the LSOAs of London borough of Islington, this indicator varied from 0.33% (the lowest in England and Wales) to 0.95%.

The relative annual cost averaged at the local authority level ranged from 1.17% in Leicester to 0.4% in the City of London.

Table 2. Local authorities with the highest relative cost of broadband (May 2020)


The primary reason for such discrepancies in the relative cost of broadband is the large income differential between regions, with the lowest household income apparent in the same parts of the country where broadband is relatively more expensive – south west, north, east of England, and in Wales.

Furthermore, even this measure alone does not paint the full picture, as noted by the Alliance for Affordable Internet[5]. Even though 2.35% of net household income spent on basic broadband in the most relatively expensive areas may not seem like a lot, this figure does not completely reflect the extent of inequality and poverty. In some LSOAs of England for example, up to 61% of the population is income deprived[6], which means that for these households broadband not only becomes even more relatively expensive but the costs may be prohibitive.

Note: no comparable data for Wales was available

It is commonly accepted that income is an important factor in broadband non-adoption. In their Access and Inclusion Study 2018, Ofcom found that ‘three in ten of the “most financially vulnerable” group live in households without any internet access and 8% have access only via a mobile. Those who do have broadband are significantly less likely than average to have a superfast connection (28% vs. 40%).”[7]

Broadband inequality became even more significant during the Covid-19 pandemic. As noted by Sir Tim Berners-Lee, the inventor of the World Wide Web, ‘60,000 children in the UK have no internet at home and device poverty stops many more from learning online while schools remain closed.’ (The Guardian, 4th June 2020).

Furthermore, as learning and working from home which increasingly relies on virtual meetings using various video platforms are becoming a norm, access to high enough upstream speeds is ever more important. Higher upstream bandwidth is however accessible only on higher tier, more expensive broadband tariffs, which further disadvantages households on low income.

Technology and competition

The cheapest broadband services are still largely provided over copper (ADSL), even though the larger providers such as BT and Vodafone are phasing out this technology, tempting consumers with partial fibre (FTTC) products instead. At the time of our data collection, BT’s entry level FTTC service was priced identically to ADSL.

In a handful of LSOAs, the cheapest broadband products were offered over FTTH, cable, satellite  and wireless technologies. The latter two platforms came out as the lowest cost in rural areas where competition from wired broadband providers is limited. As a result, the lowest cost options came with significant data caps of 5GB and 20GB respectively (see Table 1). In these areas, households who need more data and higher bandwidth, which would be a norm elsewhere, would have to pay considerably more.

Full fibre (FTTH) is becoming increasingly competitive in terms of cost as broadband providers who invested in this infrastructure aim to sign up as many households as possible to recover the cost of investment. In addition, they know that the value of an FTTH customer and the potential to entice  them to sign up for additional services is significant.

Conclusion

At the small area (LSOA) level, the majority of consumers in England and Wales are able to access entry level broadband which is regarded as affordable by Ofcom and other bodies. For example, The Broadband Commission for Sustainable Development set a target of entry level broadband services becoming affordable in developing countries at less than 2% of monthly gross national income per capita by 2025[8].

The quality of entry level broadband consumers can access in different areas of England and Wales is however variable. Depending on where they live, some households will pay £180 a year for a wireless broadband service with 20GB monthly data cap or for an FTTH service with unlimited usage.

In addition, due to income inequality households in some parts of the country will spend a larger proportion of their income on basic broadband than in others. Moreover, given significant income deprivation of households in some areas, they find it hard to afford even basic broadband. Government support schemes such as The Gigabit Broadband Voucher Scheme (now ended), Access Broadband Cymru, and the recently launched Rural Gigabit Connectivity Programme are helpful. However, while they address a signifcant proportion of the population at risk, the most vulnerable can still be excluded.

Get in touch

The complete dataset used to produce this analysis is part of our UK Broadband Mapping at postcode level and UK Plus services. For more information see http://point-topic.com/our-services/thinkpoint/ and http://point-topic.com/our-services/uk-plus/

To find out more you can contact us on 020 3301 3303 or e-mail oliver.johnson@point-topic.com 

If you have questions about this analysis, you can contact Jolanta Stanke on jolanta.stanke@point-topic.com


[1] Delivering the Broadband Universal Service, Ofcom, 2019.

[2] We excluded mobile and (public) Wifi technologies but included wireless/FWA and satellite platforms.

[3] We acknowledge this is not a complete record, and some smaller ISPs may have been missed. Nevertheless, our analysis is based on 69 residential broadband providers, which is a significant number.

[4]https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/datasets/smallareaincomeestimatesformiddlelayersuperoutputareasenglandandwales

[5] https://a4ai.org/affordable-internet-is-1-for-2

[6] The Ministry of Housing, Communities & Local Government describes Income Deprivation as measuring the proportion of the population experiencing deprivation relating to low income. The definition of low income used includes both those people that are out-of-work, and those that are in work but who have low earnings (and who satisfy the respective means tests).

[7] Access and Inclusion in 2018: Consumers’ experiences in communications markets, Ofcom.

[8] https://www.broadbandcommission.org/

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