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  1. Spotlight on Policy
23 November 2020updated 09 Sep 2021 12:34pm

A digitally powered economic recovery

Connectivity and technology are key catalysts for growth.

By Mark Evans

The UK economy is mired in uncertainty. Our relationship with the EU will change when the Brexit transition period ends, but we don’t yet know how. The coronavirus pandemic will pass, but we don’t yet know when. A recession this year was followed by encouraging growth, but that has slowed, and the country’s economy is over 8 per cent smaller than it was before the pandemic.

This is a challenging environment for investment, but it is in times like these that investment must be encouraged in those areas that can most powerfully support the economy. Digital connectivity, a proved enabler of growth, does precisely that and needs to be a priority.

We know that communities and businesses have relied on connectivity as never before during this pandemic. Technology has allowed people to work from home on an unprecedented scale. Research from Development Economics estimates that mobile connectivity protected over £200bn of the UK’s economic output during the first lockdown.

Devastating though the coronavirus pandemic has been, digital connectivity has helped minimise its impact and can accelerate the recovery from it. Better access to digital tools and data and more remote working could give UK businesses a productivity boost of over £34bn. The application of 5G and connected technologies, such as smart grids and autonomous vehicles, can save up to 269Mt of CO2 by 2035; that is almost the equivalent of England’s total emissions in 2018.

Connectivity can unlock opportunities for growth in all parts of the UK, creating a more balanced economy. That is why O2 proposed the Shared Rural Network – a collaborative agreement between the UK’s mobile network operators, supported by government and Ofcom – to deliver £1bn of investment to improve 4G coverage for rural communities. This move towards a more collaborative and partnership-based approach to investment will extend 4G coverage to 95 per cent of the UK’s land mass and virtually eradicate partial not-spots.

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Last year, we launched our 5G network simultaneously in England, Northern Ireland, Scotland and Wales. Talent is not defined by geography and location; neither should opportunity. Access to connectivity can help businesses grow and fulfil their ambitions, wherever they may be.

Of course, better connectivity requires investment. The government’s own Future Telecoms Infrastructure Review estimated that a capital investment of £7bn to £8bn is needed if the UK is to be a leading 5G economy. This is a major challenge for an industry that sits in a low-margin sector, where revenues are in decline and billions are spent on spectrum auctions and license fees.

O2 is investing over £2m a day to strengthen the reach and capacity of our network. If future investment is to be maximised and the full power of digital applied to the UK’s economic recovery, it must be supported and encouraged by public policy.

There are three areas where the government should take action. First, it should modernise planning policy to enable better coverage to be delivered easier and faster. Too often, planning policy is an obstacle to progress, rather than an enabler of it. Electricity pylons can be up to 55m, but under current rules, most UK mobile masts are limited to 25m, which means you need more of them. Coverage needs to be improved further on the UK’s roads, yet planning policy often prevents us from installing infrastructure near a highway. The industry often has to go through a complex planning application process to undertake even basic upgrades of existing infrastructure.

These obstacles can hold us back from delivering the service we want to give and our customers want to receive. The government is to be applauded for proposing reforms to mobile planning policy this year. It is important now that these are pursued and implemented with pace and urgency.

Second, it should encourage our regulator, Ofcom, to focus on the strategic priority the government has set it: to focus on increasing investment. UK mobile phone prices are among the lowest in the world. The average mobile tariff has declined by 19 per cent since 2016, while mobile data consumption has gone up by 146 per cent over the same period. A cup of coffee costs more than three days of unlimited connectivity. Which of these can you not live without? 

Third, industry consolidation is essential for the emergence of connectivity champions of scale that are equipped and geared to deliver greater investment. Europe has about 830 telecoms operators, 14 times as many as Asia and twice that of North America for every billion customers served.

The regulatory wheels are turning in consideration of our own proposed joint venture with Virgin Media. We hope for a positive outcome as soon as possible so together we can get on with our joint commitment to invest £10bn over five years and create 4,000 jobs and 1,000 apprenticeships at a time when infrastructure investment, job creation, training and skills are so vital.

The recovery from the coronavirus pandemic will not be smooth or easy; neither will the challenges posed in a post-Brexit world. Yet connectivity can make our economy faster, stronger, more sustainable and fairer. The government, Ofcom and the industry can, by working together, maximise the positive contribution connectivity can make to businesses and communities across the UK.

Mark Evans is CEO of Telefonica UK.