You will have had this moment: sitting on a train, laptop open, clicking on a webpage – and nothing happens. The ‘No Internet’ error appears. And you are forced to waste a chunk of time trying to claw a working connection back. Until recently, I had been inclined to forgive train companies for the hopelessness of their wi-fi, putting it down to the vagaries of cross-country infrastructure. I am no longer so understanding.
A recent report by Nicholas Hellen at the Sunday Times found that “poor connections on the British rail network is the result of a deliberate policy by train operators to ration wi-fi”. It appears that the wi-fi infrastructure has fallen into neglect: almost a decade old and unable to cope with modern demands for the internet. And yet, this does not appear to trouble the government. Last spring, the Department for Transport contemplated “cutting free wi-fi for train passengers in England to save operators £5m a year”.
This is not only a personal irritation. 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.
To see the magnitude of the misstep, consider a rough-and-ready calculation of the value of fixing the wi-fi on British trains. The result, when you compare it with the value of the transport investment that dominates politics today – the construction of HS2 – is interesting.
Today, British passengers make around 1.496 billion rail journeys a year. According to material used to make the case for HS2, 63 per cent of these are for commuting, 24 per cent are for business, and the ‘value’ of that time spent travelling is £6.04/hour and £31.96/hour respectively. (Here, the idea is that people would be willing to pay those amounts to ‘get back’ an hour spent travelling.) If you combine these numbers with the average length of those journeys (63 minutes for a commute) you get a sense of the value of time spent travelling on British trains: about £18bn a year.
Now, a standard part of the case for any transport project is the claim that it will speed up travel and get people back some of that lost time. In the HS2 case, these reductions in journey times make up more than 40 per cent of the total benefits of the project. But in much the same way, if you believe that this approach is sensible – that the value of a transport project is, in part, getting back lost time – then we can use it to value the benefit of better wi-fi: for, if the internet worked, I would no longer have to twiddle my thumbs while waiting for webpages to load, and would get back some lost time as well.
And so, as with HS2, we can figure out what the value of saving this time might be. To start with, a recent report by Ofcom suggested that 20-30 per cent of all passengers use wi-fi (call it 25 per cent). In turn, it was said, a third of them are using it for work. If we assume that these people want to spend half their journey on the wi-fi (which seems fair, in the absence of readily available data) and that for half of that time the wi-fi is broken (which also seems fair, based on personal experience) then we can use these numbers to calculate the value of the time lost on trains due to bad wi-fi: £376m a year. Better wi-fi would save you that amount.
But of course, this £376m saving is not a one-off – the benefit from better wi-fi will continue. If we take this into account and calculate the value of a stream of savings of the same magnitude each year in the future – which is known as the “present value” (PV), using the same planning horizon (60 years) and ‘discount rate’ (3.5 per cent for 30 years, then 3 per cent) used to calculate the PV of HS2 – then the total benefit of fixing the archaic wi-fi on British trains is in the ballpark of £9.9bn.
By itself £9.9bn is a striking number. It implies that, by fixing the wi-fi, you might be able to get a benefit that is about a third of the total benefit of building the entire first phase of HS2. (In the beginning, that was estimated to be about £28.1bn). More remarkable, though, is what happens when you then take account of the relative costs of the two investments. Because whereas the cost of fixing the wi-fi is said to be in the region of £200m – the cost of the first stage of HS2 is now estimated to be about £50bn, 250 times that.
In the decade-long history of HS2 calculations and revisions, the benefit-cost ratio for the entire project has never been higher than 2.5 – in other words, £1 of spending on HS2 never promised more than £2.50 of benefit back. Yet according to the numbers above, the benefit-cost ratio of fixing the wi-fi on British trains could be something like 49.7 – meaning £49.7 benefit for every £1 spent. In other words, fixing the wi-fi could be about 20 times better value than the best-case ever presented for building HS2.
Yes, this calculation is extremely rough. It is full of simplifications (eg, rail volumes from 2022 but time values from 2013; repair costs only incurred in the first year; savings fixed over time), guesstimates (e.g. people spend half their journey online), and assumptions (e.g. no mobile hotspotting, overestimating the benefit; time values have increased since 2013, understating the benefit). And of course, in deciding whether to invest in a project the question is not whether one has a higher benefit-cost ratio, but whether the ratios are sufficiently greater than one – and if so, you ought to do both. (Though that is now in doubt with HS2.)
But even despite those caveats, it is striking how large the relative benefit of fixing the wi-fi might be. Suppose, for example, you weaken the assumption that people want to spend 50 per cent of their journey on wi-fi and make it a measly 5 per cent. (Perhaps there is enough mobile connection to do a few emails or to create a personal hotspot.) Even then, the benefit is still about £1bn – 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 wi-fi is still better value than HS2. Yet the fact that this sort of investment is dismissed, never mind discussed, is important.
One reaction to this argument is to take issue with the cost-benefit approach. The HS2 calculation itself is a classic case of how hard they are to do well: benefits now appear to be overstated, costs understated (doubled between 2011 and 2020), and the methodology questionable. For example: as noted before, a big chunk of the benefit to HS2 comes from “time savings” due to a faster commute. But that assumes all time on a train is wasted. That might be true for a commute in a car while sitting behind a wheel, but sitting comfortably in a train carriage? (Ironically, that would require the wi-fi to not work at all.)
The deeper problem is that this neglect of wi-fi-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, where the most important features of economic life are those that can be seen and touched: roads and bridges, railways and tunnels. That might have been true in the 19th century, when the economy was made up of farms and factories, where people handled tools and machines, and output could be readily counted.
But it is no longer the case. What matters today is the intangible world – software and services, IP and ideas. Wi-fi, not railways; bits, not atoms. Our leaders must recognise that.
Daniel Susskind is an economist at Oxford University and King’s College London, and the author of several books, including “Growth: A Reckoning” (Allen Lane, April 2024).
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