Full expensing should provide a boost for operators’ infrastructure investments, while spectrum sandboxes will offer opportunities for wider industry to explore
An intentionally pro-growth statement
On 22 November 2023, the UK Government unveiled its Autumn Statement. Billed as a ‘Budget for growth’, it is arguably broader than some had expected, with measures relating to AI, quantum computing, research and development by SMEs, and investment in strategic manufacturing. The most relevant interventions for the telecoms sector are:
Making full expensing permanent;
Introducing regulatory sandboxes for spectrum sharing;
Extending the ‘Growth Duty’ to Ofcom;
Consulting on proposals to strengthen regulation;
Kickstarting smart data initiatives;
Accelerating planning approval timelines; and
Opening the £15m Connectivity in Low Earth Orbit (CLEO) R&D programme.
Boosting investment in telecoms infrastructure
Despite no mention of the term ‘broadband’ in the Chancellor’s speech, certain measures in the Statement will be particularly pleasing for many in the telecoms sector (particularly larger operators). First and foremost, the Government will make full expensing permanent. This is a tax relief that allows firms to deduct the full cost of qualifying IT equipment, plant and machinery (e.g. fibre infrastructure, ducts and poles, mobile base stations) in the year they are purchased. In 2021, the Prime Minister (then Chancellor) introduced the ‘super deduction’ for businesses to stimulate investment. This was followed by the introduction of full expensing on a temporary basis in the Spring 2023 Budget. BT (namechecked by the Chancellor) has been especially vocal about the need for the scheme to continue in order to support gigabit broadband deployments. While potentially not as impactful for altnets that may be currently operating at a loss, full expensing should give confidence to long-term investors such as BT to press ahead with delivering on their fibre rollout plans.
Supporting the country’s scientists and innovators
Another notable measure in this year’s Budget relates to sandboxes, i.e. spaces for the testing of new products, services or business models. In addition to a financial market infrastructure sandbox to test distributed ledger technology, the Government has announced that it will establish new regulatory sandboxes for spectrum sharing, engineering biology and space to help support innovation in these areas. These will leverage field trials and the collection of real world data to explore technical solutions to improve spectrum sharing among different users. The Government highlights factors such as the increasing use of network function virtualisation and software-defined radios that have made sandboxes a viable way to help develop new solutions for sharing. Within its Spectrum Roadmap published last year, Ofcom set out its plan to support industry’s use of sandboxes, with an initial focus on exploring more flexible access in the 3.8-4.2GHz range.
Ofcom’s new responsibility for driving growth
There was a further reference to Ofcom in respect of extending the Growth Duty to other UK regulators. Ofcom, along with Ofgem and Ofwat, will soon face a new obligation to actively contribute to fostering innovation and growth within the sectors it oversees. The Government intends to introduce secondary legislation in 2024 to make that happen. It is also consulting on ways to strengthen economic regulation of the energy, water and telecoms industries, proposing changes to the appeals regime and that Ofcom review whether its existing monitoring activity is sufficient to capture competition issues in the market. Finally, the Government will kickstart a “Smart Data Big Bang”, setting out how it will utilise new powers in the Data Protection and Digital Information Bill to explore innovative opportunities across seven sectors, including telecoms.
