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An Economist’s Case for Boosting WiFi on Trains …
(08 Mar 2024, BWCS Staff)Isn’t it refreshing when a burst of common sense spears the fug of muddle-headed thinking and wrong, ideas?
Writing in the New Statesman this week, acclaimed Oxford Economist, Daniel Susskind, pours scorn on the UK government’s proposal that train operators should aim to save £5 million a year by scrapping on-board WiFi. Instead, he argues, for a fraction of the cost of the doomed HS2 project, passengers on Britian’s railways could and should be provided with fast on-board internet connections and, being the economist he is, he puts an enticingly large monetary value on the return such an investment could make.
Susskind’s antipathy to slow and no WiFi connectivity on trains is not just personal. Instead, he argues “It reflects a deeper problem with how we often think about the origins of growth in the 21st century. At a time when the British economy is on its knees, these are the sorts of low-hanging investments that we should seize. But we do not.”
Eschewing his Oxford background he then produces some “back of the envelope” calculations to prove what a costly mistake the government is in danger of making. His arguments and figures are based on the UK, but they could equally be applied to any developed economy.
Luckily for Susskind, the development of the business case for HS2 has provided him with a treasure chest of data to assist his rough and ready sums. As he points out, British passengers make around 1.496 billion rail journeys a year and, from HS2 calculations, we know that 63% of journeys can be classified as commuter and 24% for business travel. Again, from one of the earlier HS2 business cases, the value of a commuter’s time is given as £6.04 per hour and that of a business traveller £31.96 per hour. Using these numbers, Susskind argues that the total value of time spent on board trains in the UK is around £18 billion a year.
While these figures were first used to justify the cost of shaving time off rail journeys in the UK, which HS2 had promised, Susskind uses them to put a monetary value on the cost of poor WiFi.
Critics may differ over the accuracy of his assumptions, but we believe his broad points are valid. He assumes that 25% of passengers use WiFi for around half of their journey time and 33% of these are business travellers. Now, if the WiFi is not accessible for half of the time needed, then, using the HS2-generated values per hour of travel, he concludes that better WiFi could “save” the UK around £376 million a year. Over ten to 30 years he computes that would be a huge saving (almost £10 billion).
Of course, we at BWCS agree whole-heartedly with our learned friend, however, we would argue that he could go further – his figures fail to account for the proven increase in passenger numbers and hence ticket sales revenue that come solely as a result of the provision of acceptable on-train WiFi service. Based on previous rigorous research it has been calculated that the addition of working WiFi to trains boosts overall passenger numbers by around 4%. Using the total UK train ticket revenue for 2019 of £12 billion, this would increase ticket income by £480 million annually.
Given that estimates for filling in gaps alongside the UK rail network start at around £200 million – depending on how many routes are covered, then Susskind’s figures, not to mention the boost to ticket revenue, would appear to be slam-dunk arguments in favour of not just keeping WiFi on UK trains but for investing massively in it too.
Susskind is well aware of the caveats to his argument, however, as he writes - “It is striking how large the relative benefit of fixing the WiFi might be. Suppose, for example, you weaken the assumption that people want to spend 50% of their journey on WiFi and make it a measly 5%. Even then, the benefit is still about £1 billion (over 30 years) – with a benefit-cost ratio twice as high as HS2 ever had. Put differently, even if the calculation is out by an order of magnitude, fixing the WiFi is still better value than HS2. Yet the fact that this sort of investment is dismissed, never mind discussed, is important.”
In all of the papers produced to justify investment in HS2, the maximum benefit for every £1 spent on it was only ever £2.50. Yet, according to Susskind, the benefit-cost ratio of fixing the WiFi on British trains could be around £49.7 benefit for every £1 spent. In other words, fixing the WiFi could be about 20 times better value than the best-case ever presented for building HS2.
In summary, he writes “The deeper problem is that this neglect of WiFi-like investments shows how we often misunderstand the origins of economic value. Too many politicians and policymakers have inherited an old-fashioned view of the economy. What matters today is the intangible world – software and services, IP and ideas. WiFi, not railways; bits, not atoms. Our leaders must recognise that.”
It is very hard to argue against that conclusion, though, of course, we welcome all viewpoints…
This year’s WiFi on Trains Conference – Traincomms 2024, will take place on the 13th and 14th of November. For more information on getting involved please see www.Traincomms.com or contact Ross.Parsons@BWCS.com .
The latest programme will be available here http://traincomms.com/#content2b
Traincomms Tickets http://traincomms.com/book1.cfm
Traincomms 2024 is being sponsored by Huber+Suhner, Westermo, CGI, Boldyn Networks, Rajant and Icomera. Oxyfi, Antonics and Polomarconi will be exhibitors.
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