Br0kenTeleph0n3

Following the broadband money

How Maria Miller can save British broadband

with 29 comments

Miller - talks are not just about saving face, we hope

Miller – talks are not just about saving face, we hope

If tomorrow’s meeting to get a grip on the provision of next generation broadband access (NGA) in the “Final 10%” is not to produce a damp squib, the government needs to commit itself to true competition in telecoms market.

Culture minister Maria Miller called the meeting between her, communications minister Ed Vaizey, and representatives from BT, BDUK and six would-be alternative network operators (altnets) who are looking for money from the Rural Community Broadband Fund (RCBF) in the wake of the highly critical National Audit Office report into value for money from the rural broadband process overseen by BDUK.

Some of the six altnets have been waiting more than a year because the fund won’t release the money until it knows for sure that the areas the altnets plan to cover won’t be over-built by BT’s BDUK-funded roll-out.

BT claims commercial confidentiality in the terms and conditions of its contracts with local councils, especially the speed and coverage details of its roll-out, Besides, they are subject to change following a survey of its local assets, it claims.

BT may claim, but the claim does not stand up. In the appeal of Derry vs the Information Commissioner, the Information Tribunal “upheld the ICO view that a written agreement between two parties did not constitute information provided by one of them to the other, and that therefore, a concluded contract between a public authority and a third party does not fall within section 41(1)(a) of the (Freedom of Information) Act.”

S41 is the bit about commercial confidentiality.

The tribunal went on to say, “We are aware that the effect of our conclusion is that the whole of any contract with a public authority may be available to the public, no matter how confidential the content or how clearly expressed the confidentiality provisions incorporated in it, unless another exemption applies.” (Emphasis mine.)

It also noted that depending on the circumstances, some information obtained from a third party may count as confidential. This was information regarding a pre-contractual negotiating position, and “technical information” either contained within the body of a contract or provided as a separate schedule.

Regarding prior negotiating positions: as noted by reader Mike Phillips, the councils last year ran their open market consultations to identify the so-called ‘white areas’, i.e. locations that require subsidy as well as the ‘no-build’ areas that BT would not consider for three years.

It is not clear why BT should be granted the latitude of service delivery promises being “subject to survey” when it is not available to other suppliers, nor that end users should be denied a higher degree of certainty about where, when and what kind of service they might receive from BT.

BT and the local authorities with whom it has contracts might like to argue that the speed and coverage templates (SCTs) falls into the “technical information” category.

BT is not using secret technology to fulfill its BDUK contracts . It is hard to see why it should keep the SCT secret. However, it does stop altnets from identifying and working in the remaining white areas. This cannot in the public interest, and one could argue that for local authorities to think and act otherwise would be in dereliction of their fiduciary duties.

Having sought and received legal opinion on publishing the SCT details, it is inconceivable that BDUK is not aware of these issues. Moreover, in response to a Freedom of Information request, it has indicated that it expects the SCT details to come out in due course.

One need not wonder whether BT will defend its carefully-orchestrated position and resist the disclosure of SCTs. It has form. The FOI trail on Liverpool Direct (BT’s controversial joint venture with the Liverpool City Council) and here and here shows how hard it will fight (but lose) to keep its contracts secret.

Just who will fight BT’s corner has been subject to change. However, it was revealed on Friday that BT had dropped Sean Williams, its head of strategy, who spoke for the telco when the House of Lords was interested in broadband. BT will now be represented by Openreach CEO Liv Garfield and NGA roll-out boss Bill Murphy, who were the original choices.

Had Williams stayed on, Miller would be been within her rights to question his deal-making authority. This is because Ofcom has required BT to run Openreach “functionally separate” from its other operating companies, even though Williams admitted to the lords that Openreach contributes to and shares the same capital pool as the other BT operating companies.

Because of “functional separation” Williams would be have been hard-pressed to commit Openreach to anything. If he could, it would reveal functional separation as a myth and possibly expose Ofcom for improper application of its own regulation.

Whether this matters is moot. At the annual seminar of INCA, the Independent Networks Co-operative Association, last week, Frank Mather, the DG Connect official who looks after the UK broadband issues, said the European view was that Britain has forsaken competition for transparency as a way of regulating and achieving its broadband goals.

The NAO showed how successful that strategy has been with respect to the £1.2bn BDUK process. In fact, both MPs and civil service have done even worse trying to govern using transparency – the banking crisis, Libor, crime statistics, even MPs’ pay, to name some more serious incidents.

In a recent blog, the well-connected Philip Virgo paraphrases economist Michael Beesley’s insight that “it is impossible for officials or regulators to understand that cost bases of the industries they seek to plan or control. Therefore they should not try. They should instead focus on quality of service, price and barriers to competition (particularly those blocking innovative new entrants), leaving those regulated to work out how to exploit opportunities to make more money by using innovation to deliver better services at lower cost. “

Part of Beesley’s heritage is due his exposure to the privatisation of British Telecom in the 1980s. In an obituary, Christopher Foster wrote of Beesley, “Sir Keith Joseph asked him to look into the possibility of liberalising British Telecom. Though not all his recommendations were accepted, he argued for more competition than the government was ready for (it would have been better if he had been listened to). Nonetheless, his views were influential on the form of that privatisation – and all subsequent privatisations, and their regulation.”

Beesley’s ideas were later incorporated in the monopoly price governing formula “Retail Price Index-x%”, which Ofcom modified to “Consumer Price Index-x%” in its latest proposals governing Openreach’s monopoly over wholesale broadband and landline services.

So what can Miller get from tomorrow’s meeting? Clearly BT must give her a bone to throw to the Public Accounts Committee, which meets to discuss the NAO report, to save her face. The (leaked) Pennell report that BDUK “lacks commercial nous” suggests she now has the power to bend her civil servants to her will or to ignore them.

Malcolm Corbett, INCA’s executive director, who will be at the meeting, says altnets will be seeking the following:

  • that the six projects in the room get their money and protection against BT overbuilding them for a period
  • that BT publishes its actual costs, ie invoices and payslips, for state-aided NGA roll-outs
  • that Miller re-opens negotiations on Open Access with respect to BT (and other networks) poles and ducts and even fibre
  • that the government allows the introduction of alternative models to gap funding and sources for future roll-outs. (The INCA seminar revealed that the only public money in Stockholm’s highly successful Stokab dark fibre to the premises network was SEK50,000 spent on the feasibility study; the rest came from government and bank loans and re-invested profits.)
Fed-up farmers dig for B4RN

Fed-up farmers dig for B4RN

One more thing Miller might get. The INCA meeting heard that there is apparently a consultants’ report doing the rounds in BDUK that cross-matches business premises against postcodes and BT’s NGA roll-out. The relationship is inversely proportional, ie the more densely businesses cluster the less likely they are to be passed by BT fibre. This is because BT doesn’t want to swop relatively lucrative leased lines for cheaper broadband connections.

There is plenty of evidence:

  • the legal challenge to BDUK’s original Superconnected Cities project
  • Virgo’s reportage of BT’s preference to build fibre to the home in sparsely-populated rural Lancashire in competition to B4RN rather than crowded EC1
  • former BDUK-community linkman Mike Kiely’s frustrated attempts to get fibre into a Shoreditch co-op that houses 89 mainly high tech start-ups
  • a new proposal from BT to Lorne Mitchell’s Goudhurst NGA project, just as they are about to award a contracts, among others.

If true, it shows two things. One is that BT responds only to competition. Secondly, it appears BT is sabotaging Miller’s efforts to build Britain’s economic renaissance on the networked creative, innovative, entrepreneurial sector. Four hundred years ago the heads of those responsible would have decorated London Bridge.

29 Responses

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  1. What would be the basis for altnets asking “that BT publishes its actual costs, ie invoices and payslips, for state-aided NGA roll-outs” – do they expect a competitor to fully disclose all its internal finances ? Do they offer the same in return ?

    Be interesting to see what EU Treaty compatible agreements can limit competition through overbuilding – “agreements between two or more independent market operators which restrict competition are prohibited by Article 101 of the Treaty. “

    PhilT

    2013/07/14 at 18:35

    • If you take the king’s shilling, the king is entitled to see how you spend it. Works the same for taxpayers.

      Re Article 101 – please refer it to the state aid lawyers who say something to the effect that you can’t use state aid to finance a move in competition to an existing service provider, which is the basis of BT’s complaint against Birmingham’s original Superconnect Cities project, as I’m sure you remember.

      Br0kenTeleph0n3

      2013/07/14 at 20:50

      • So with all council and government contracts they are entitled to see the companies spend with suppliers and sub-contractors, and that information is available to the public?

        Who are the six altnets?

        Somerset

        2013/07/14 at 20:54

      • That would be my interpretation of the Information Tribunal’s decision.

        Re the altnets, ask DCMS – it issued the invitations.

        Br0kenTeleph0n3

        2013/07/14 at 20:57

      • So I could request details of the contract and what the company paid for the door handles in a new council building? This is similar to BT providing details of the cost of a cabinet.

        Somerset

        2013/07/14 at 21:09

      • Well, I would try to make it meaningful, like BT’s speed and coverage promises, or indeed cost of an installed, hooked up, working cabinet … The NAO report says to establish value for money, this is partly what local councils will have to do. Good job for pernickety retired telecom engineers…;-)

        Br0kenTeleph0n3

        2013/07/14 at 21:25

      • State Aid is a constraint on State subsidy, to avoid distorting competition. Hence BT et al objected to State subsidy affecting the market. I don’t understand your / INCA argument as to how that could be used to prevent BT overbuilding – it can only be used to prevent State subsidy where BT or others are likely to overbuild, or where the existing services would be unfairly competing with a new subsidised operator.

        You have not shown why Taxpayers have a right to see input costs of a contractor rendering a service to a public body, let alone competing providers.

        PhilT

        2013/07/14 at 21:32

      • “it can only be used to prevent State subsidy where BT or others are likely to overbuild, or where the existing services would be unfairly competing with a new subsidised operator.” I get the first bit, not the second, where you seem to have reversed logic and practice. But answer this: BT has already said Final Third is uneconomic. There’s no broadband USO, so why would it build and especially overbuild without the incentive of a subsidy? Then, it would want to do the absolute minimum to ensure that it lost as little as possible while ensuring that it kept the competition out.

        Br0kenTeleph0n3

        2013/07/14 at 21:45

      • The difficulty with these discussions is knowing how correct some of the statements that people make are.

        As a random example is ‘Taxpayers have a right to see input costs of a contractor rendering a service to a public body, let alone competing providers.’ correct?

        It will be interesting to look at the financial state of these 6 and other altnets and see how suitable they are for providing their own investment and receiving state aid. Maybe that will determine how much they could be given. If BT/BDUK is enabling virtually every cabinet then there won’t be many large patches left with a decent number of potential customers.

        Somerset

        2013/07/14 at 22:25

  2. As a taxpayer, I would want to see costs if there is only a single supplier. If there was true competition then I would not be so concerned. Is not the lack of competition the NAO’s concern?

    Also, it is correct about the lack of provision for businesses. The justification for the subsidy from the government and local councils is to promote growth, yet in this area business parks that have previously been by-passed as not economic have no priority under the subsidised scheme. The popular vote is pursued by politicians using lines like “superfast broadband will enable a video to be downloaded in 10 seconds”. How will that help with growth?

    David Cooper

    2013/07/14 at 22:25

    • As long as the video starts playing straight away like iPlayer the speed just has to keep up with the viewing.

      What’s happened to business parks in Cornwall?

      Somerset

      2013/07/14 at 22:28

  3. The challenge has to be on unfair practices/abuse of monopoly/misuse of privileged information, and not on State Aid issues, because it must be obvious that BT will simply argue that delivering FTTP to a (previously ?and currently?) uneconomic area is part of its ‘commercial roll out’/Road to Damascus moment and therefore unaffected by State Aid issues. The fact that they are presumably simply lying is surely like the King’s New Clothes, and needs to be unmasked and put before some public body that can look at unfair business practice, as does the blatant disregard by BT for business services we see.

    At this moment, Murphy/Williams and Garfield are simply thumbing their noses at what appears to be a complicit and ineffective government. BT can safely assume the government are ineffective fools but you cannot fool all of the people all of the time, as the saying goes. Miller’s meeting must surely be seen as a desperate attempt to defend her crumbling inherited personal wicket and not as a move to work towards delivering ‘the best broadband in Europe’ to the nation.

    mike phillips

    2013/07/15 at 07:34

  4. An actual quote from the Derry ruling is “Still less are we expressing any general view as to what
    public authorities should disclose about commercial detail from contracts into which they
    enter. We are simply attempting to apply the law contained in the Act, as we see it, to the
    5particular facts of the 1999 Ryanair Agreement as at the date when the Complainant’s request
    for information was rejected in February 2005″ – so it’s a specific ruling, not a precedent. “Connecting Cambridgeshire” declined to provide even a list of Tenders for their non-Framework process.

    There is much published guidance such as http://www.justice.gov.uk/downloads/information-access-rights/foi/foi-s43-exemptions.pdf which post dates the Derry ruling and council officials are following in declining to provide almost any information.

    PhilT

    2013/07/15 at 07:58

  5. As the Reply link is missing, an example of my point about BT wishing to overbuild is that of changed circumstances. I cannot see how a lawful agreement can be made to prevent any commercial operator building a network if for example a new housing development or business required services that make it economic to do so. For example a company with a national contract for connectivity from BT should not be denied access to BT services in a location that is in the Final Third / 10% / 5% / whatever moving target just because an Altnet that has been hiding in the wings for the last 10 years wishes to claim a subsidy to build a monopoly local infrastructure in that location.

    Technology changes could also mean for example BT closing down local exchanges and using long range PON FTTP from regional exchanges to provide services direct to homes. It would not be correct or in my opinion lawful to bar them from doing this in any particular location, as this would be anti-competitive and not in the public interest.

    The people that don’t want to sign up to Gigaclear in Underriver should not be denied the opportunity to be served by BT should they wish to do so at some point, for whatever reason.

    PhilT

    2013/07/15 at 08:09

  6. What I was trying to say with “where the existing services would be unfairly competing with a new subsidised operator” is that State Aid rules prevent subsidy where existing services would be subject to unfair competition from the arrival of a subsidised operator. So the notion that Article 101 inhibits State Aid lawyers from restricting application of State Aid is incorrect – 101 requires competition, State Aid is potentially anti-competitive in favouring one party (the recipient).

    PhilT

    2013/07/15 at 08:18

  7. This shows what BT does for long lines:

    http://www.superfastcornwall.org/media-centre/100/2013/06/25/historic-tinners-village-of-coombe-celebrates-arrival-of-superfast-broadband

    Openreach looked at a variety of routes to get to the village and, ultimately, 17km of fibre was installed, of which one kilometre consisted of brand new poles for aerial fibre. The

    Somerset

    2013/07/15 at 09:28

    • The devil may be in the detail. The website crows about superfast broadband, and indeed some can get it, some cannot.

      Parish Council
      Telephone Number 01726XXXXXX on Exchange NANPEAN is served by Cabinet 6
      FTTC 30.9 / 5.9

      Church
      Telephone Number 01726XXXXXX on Exchange NANPEAN is served by Cabinet 8
      FTTC 39.9 / 6.5

      Primary school
      Telephone Number 01726XXXXXX on Exchange NANPEAN is served by Cabinet 11
      ADSL2+ 4.5 / —

      Private business
      Telephone Number 01726XXXXXX on Exchange NANPEAN is served by Cabinet 6
      FTTC 18.4 / 4.6

      Car dealer
      Telephone Number 01726XXXXXX on Exchange NANPEAN is served by Cabinet 6
      FTTC 17.4 / 4.2

      I’ve removed the full phone numbers, though all available on request. This didn’t really take very much digging unlike the project ;-)

      Which seems to need a little more digging if the claims about “superfast broadband” availability are to be credible.

      Obviously I haven’t checked every number in the parish. Maybe I just happened to come across the one or two (or three) who still don’t have access to superfast broadband after all this work and money, because they are “too far from the cabinet”, or more accurately, the cabinet is too far from them.

      dtmark1

      2013/07/16 at 14:26

      • Whereas a number in Coombe is:

        Telephone Number 0172688xxxx on Exchange GRAMPOUND ROAD is served by Cabinet 7
        WBC FTTC Up to 69.6

        Somerset

        2013/07/16 at 17:09

    • Do you honestly think this would have happened if there wasn’t a subsidy from the taxpayer?

      Andy

      2013/07/16 at 14:31

      • We subsidised this? It looks like an inappropriate choice of technologies was used here. In solving a problem with “long lines” from the exchange, the solution appears to have a problem with long lines from the cabinet(s).

        I’m sure that when the bodies dishing out the money perform their due diligence checks on the actual delivery, they will either throw the project back at BT to get them to finish it and deliver what they paid for, or they will find the contracts drawn up were poorly worded, targetting a technology rather than a deliverable and so the promises were nothing more than hopeful spin.

        If the target was merely 2Meg for all and so those rather mediocre speeds are thought to be “good enough”, then lets see the numbers – how much did it cost to upgrade those cabinets? That way we can evaluate whether our money has been well spent or not.

        dtmark1

        2013/07/16 at 15:43

      • I think the evidence is that taxpayers’ money is a poisoned chalice, whether you are BT or an altnet. It makes you do things that are irrational and consumes vast amounts of energy that would be better spent doing what you want, or inventing a cheaper way to do what you want with more people.

        Br0kenTeleph0n3

        2013/07/16 at 20:29

  8. Any news from the meeting?

    Somerset

    2013/07/15 at 21:45

    • Nothing on the record. We all await MM’s post-meeting statement, but the altnets seems moderately pleased with events. I suspect BT got off lightly,

      Br0kenTeleph0n3

      2013/07/15 at 22:26

  9. Any altnet that is investing either its own or its customers money to build a decent broadband access network has every reason to object to BT (or any other competitor) using public money to overbuild in the areas already served or planned to be served.

    The challenge is that by BT refusing to definitively state the actual postcodes/properties that they are being publicly funded to serve, it is not possible to state categorically whether in any given location public money is involved or not ie are the actual locations where altnets are building (or planning to do so) in the 2/3 of the population where BT say there is a commercial proposition to build superfast broadband infrastructure or alternatively in the 1/3 population area where public money is allegedly needed.

    What can be done is a rational consideration of each area concerned, eg how poor is the broadband now, what statements have BT or the relevant local authority made about the likelihood of there being a commercial case not requiring pubic subsidy.

    What I find confusing though is that some altnets eg B4RN have repeatedly stated that they have the commercial case to build Gbps FTTH WITHOUT SUBSIDY – in which case why are they now chasing handouts from eg RCBF? Either B4RN has a valid funded coimmercial business case or it doesn’t.

    Certainly B4RN is unusual as within its phase 1 build area sits the Abbeystead Estate (owned by Grosvenor Estates, ie Duke of Westminster beneficial trust) which is presumably acting as a major anchor tenant for the overall project.

    Guy Jarvis

    2013/07/16 at 17:03

    • Interesting point about the estate. As in ‘On the Abbeystead Estate, the Duke felt it was important to support the local community with a proper facility suitable for events and meetings and so personally financed the building of a new village hall.’ As one does…

      A number of ‘altnet’ projects seem to be in well-off areas like Hambleton.

      A reasonable assumption is that BT/BDUK will enable the majority of cabinets. This leaves those on long lines without faster speeds, although network rearrangement may help them. Not that difficult to plot where they are. But, many will be in low population densities where the altnets will not want to go?

      Somerset

      2013/07/16 at 17:17

      • If that’s the case, why is BT avoiding fibre-ing up the cabinets that serve business parks, and even EC1, as Philip Virgo has discovered?

        Br0kenTeleph0n3

        2013/07/16 at 20:36

      • Cost of cabinet v. number of customers according to ISP’s predictions? But covered by BDUK rollout.

        Somerset

        2013/07/16 at 20:39

      • Somerset,

        You are now criticizing the altnets for supposedly doing exactly what BT have been doing all along – a case of “do as I say, not as I do”? You’ve also highlighted the fundamental problem with FTTC in that those on longer lines are left with no improvement whatsoever.

        A reasonable assumption would be that BT/BDUK will enable all cabinets, not the majority.
        A reasonable assumption would be that BT/BDUK will deliver FTTP to those premises too far from the cabinet to get 24Mbps – e.g. every line over 700 metres!
        A reasonable assumption would be that BT/BDUK will publish the speed and coverage template detailing the long lines. After all, it’s not that difficult to plot where they are!
        A reasonable assumption would be that BT/BDUK will provide superfast broadband to areas with low population density as well as areas with high population density.

        Andy

        2013/07/16 at 22:16

    • I understand B4RN increased its proposed coverage area and so felt it appropriate to ask RCBF for money to cover the extra.

      Br0kenTeleph0n3

      2013/07/16 at 20:32


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