Under pressure from the Public Accounts Committee to show value for money for the £1.7bn it is receiving for BDUK contracts, BT is fighting back.
Bill Broadband has just retweeted a Guido Fawkes tweet that it will “revisit” PAC chair Margaret Hodge’s tax affairs.
Bill Broadband is one of the names used by BT’s astroturf community to defend BT’s NGA roll-out and intimidate would-be competitors.
Hodge is away and unavailable for comment.
The National Audit Office (NAO) report on the BDUK’s former Rural Broadband Programme, now renamed the Superfast Broadband Programme, contains elements that might lead to cognitive dissonance.
It reports that BDUK commissioned Atkins, a primary supplier of services to government, to look at BT’s costs to provide high speed broadband in rural areas. After looking at a few sites in Suffolk, Atkins concluded “BT had charged Suffolk nearly 20% less than would hypothetically be charged by another efficient supplier, in part reflecting that BT benefits from substantial national bulk buying power compared with other providers.” Paragraph 3.10)
That’s good news, right? But it seems there’s more joy to come for taxpayers. In Paragraph 5 NAO reports “BDUK’s experience of actual costs in phase 1 has led to BT agreeing to submit lower costs in its financial model for phase 2.”
However, it carefully notes that BT was picking low hanging fruit in Phase 1, namely peri-urban areas rather than deep rural ones where is cost to reach them is likely to be higher, unless you use a satellite.
NAO also suggests BT got other sums wrong. BrOkenTeleph0n3 revealed that BT’s planners estimated BT would break even on a 20% take-up in 12-14 years. “Take-up of superfast broadband so far has been significantly faster than forecast by BT in the phase 1 contracts. Take-up has risen to more than 20% already for two non framework projects”, the NAO found. This “should bring greater coverage than contracted, as local bodies will be able to extend their rollout with remaining funds,” it says.
BT is the only framework supplier left, and 43 out of 47 county councils have opted to use the framework to procure Phase 2, although 10 may elect to hold money back for Phase 3, the final 5%.
“Overall, the effect of the first 2 phases will be to reinforce BT’s already strong position in the wholesale market for broadband infrastructure (the Wholesale Local Access Market). BT’s assets and infrastructure will benefit from approximately £1.7 billion of public sector investment although BT must maintain these assets at its own expense. BT is also required by regulatory conditions to provide wholesale access to other suppliers.”
The NAO also revealed that the public will benefit from clawbacks due to higher than expected take-up for only seven years. “After these seven years, the supplier will keep all of the extra wholesale profit.”
BT amortises its fibre over five to 20 years, and its exchange equipment over three to 13 years.
BTW, in its 2013 rural broadband report on page 35, the NAO said “The Atkins ‘should cost’ model for Northamptonshire is three per cent higher than BT’s actual bid for the area. Atkins was not able to complete analysis of a second local body area, Suffolk, due to the difficulties it encountered in modelling a more complex technical solution. Atkins’ model is the only model available to us that has tried to match a corresponding BT bid identically.”
The hour-long Public Accounts Committee interview on the NAO report, featuring DCMS, BDUK and BT officials, took place on 28 January 2015. You can see the video here.
There are still some people who are interested in seeing what’s happening to the near £2bn of taxpayers’ money given to BT to roll out next generation broadband in the “Final Third”. Many of them probably sit on the Commons’ Public Accounts Committee, which is taking its third stab at finding if BT is delivering value for money this coming Wednesday.
The PAC, chaired by Margaret Hodge, was previously frustrated by the answers it received (here and here), and vowed to keep asking questions until it was satisfied. BT’s director of strategy, policy and portfolio, Sean Williams, who was the source of much of Ms Hodge’s frustration, gets a third act in front of the committee.
Supporting players are DCMS boss Sue Owen, BDUK CEO Chris Townsend and superfast broadband programme director Andrew Field, and Openreach MD for infrastructure delivery Kim Mears.
In its preamble the PAC said its reports on the rural broadband programme in September 2013 and April 2014 “raised concerns over lack of published information on BT’s plans for superfast broadband coverage, the availability and transparency of cost data and the level of competition secured throughout the programme. This recall session will examine the transparency of cost and rollout information and explore whether the department has done enough to promote greater competition for phases 2 and 3 of the programme.”
The curtain for the hour-long show goes up at 2.15pm on Wednesday 28 January 2015, Committee Room 15, Palace of Westminster. If you can’t make it in person you can follow on Parliament TV: Rural broadband: progress update session.
The government is looking at how to get high speed broadband to urban businesses despite state aid rules that appear to preclude using some of the £2bn of BDUK money to do so, culture secretary Sajid Javid told MPs on the Culture, Media & Sport parliamentary committee yesterday.
Javid said DCMS is talking to stakeholders, including the Federation of Small Businesses, which this month produced a second damning report on broadband, to resolve the situation.
Javid also revealed that the contracts between BT and country councils for rolling out “superfast broadband” have claw-back clauses that come into effect when take-up reaches 20%.
Javid added that the government was updating the Electronic Communications Code as part of a deal with mobile network operators to extend mobile coverage to 90% of the UK land mass announced late last year.
In February 2013 the Law Commission recommended changes to provide a clearer definition of the market value that landowners can charge for wayleaves, resolve inconsistencies with other legislation, clarify network upgrade and sharing rights, and establish the rights of land owners and network operators with respect to access to land and removal of equipment, as well as ways to resolve disputes
This link Culture secretary Sajid Javid on the DCMS annual report opens a new window. Javid’s comments on the code are at 12.43, and on broadband at 12.53.
Second permanent secretary at the Treasury Sharon White will earn less than Ofcom CEO Ed Richardson when she replaces him in March 2015.
Richardson took home £393,204 in 2013/14 for doing the job, according to the Ofcom annual report (p64) for the period. His pay was made up from salary (£284,362), pension (£56,872), flexible benefits (£19,956), benefits in kind (£2,014), and performance bonus (£30,000). The previous year he took home £378,158.
White, a black woman, will earn a salary of £275,000, Ofcom said.
A career civil servant, White was appointed to her present job in October 2013. Tom Scholar, the man she replaced, earned a salary between £150,000 and £155,000 a year, according to an October 2013 Gov.net report.
A Cambridge economics graduate, White joined the civil service in 1989, starting with spells in Washington, the No 10 Policy Unit, and the World Bank. she later worked in the Department for International Development, the Department of Work and Pensions, the Ministry of Justice and the Treasury.
She is married to Robert Chote, chairman of the Office for Budget Responsibility since 2010. They have two children.
White was appointed by the Ofcom Board, vetted by an independent assessor, and approved by the secretary of state for culture, media and sport, Sajid Javid.
MPs have launched an inquiry into rural broadband speeds following on-going concerns that nearly £2bn of taxpayers’ money is unlikely to produce the expected results.
- the extent of broadband coverage in hardest to reach rural areas
- digital access and experience of digital─only programmes, such as the new CAP system applications
- support available for those required to use digital─only programmes
Written submissions should be submitted via the Rural broadband and digital─only services inquiry page on the Environment, Food and Rural Affairs website.
The deadline is Wednesday 19 November 2014.
The Welsh government and BT have promised to start work on delivering fibre to the cabinet in every Welsh exchange by this time next year, but it may be too late to meet its deadlines.
Today’s official statement by deputy minister for skills and technology Julie James says “Work is planned to start in every telephone exchange in Wales by the end of September 2015 bringing superfast internet speeds to even more villages and towns across the country.” The finish date is Spring 2016. That gives BT, the sole contractor, six to nine months to fibre up some of the most difficult terrain in the UK.
The statement goes on to say “approximately 400 engineers (have) worked more than 400,000 hours on the project”. That’s about 25 weeks each to pass 230,000 homes and businesses. According to Welsh government statistics, there are about 1.3 million homes in Wales. Assuming that the initial 230,000 are the “low-hanging fruit”, the rest should take them at least 120 weeks. Starting this month, that makes the finish date early 2017, assuming the squad stays the same.
The £425m Superfast Cymru project, which will see 17,500km of fibre installed to connect around 3,000 new green roadside cabinets, is already under government scrutiny over value for money. The Auditor General for Wales is expected to deliver his report by the end of the year.
According to the statement, £205m of funding has been provided by the Welsh government, the UK government and the European Regional Development Fund, with BT contributing £220m via its commercial roll out and the Superfast Cymru programme.
Even if BT his its deadline, there are likely to be questions over the broadband speeds delivered. The contract (obtained under a Freedom of Information request by broadband consultant Richard Brown) commits BT to the following targets by 30 June 2016 or at the latest by the ‘Drop Dead Date’, which was redacted:
1. 90% coverage of all premises in the ‘intervention area’ at >30Mbps PPiR and a minimum of 2Mbps CIR (committed information rate)
2. 95% at >24Mbps with a minimum of 0.5Mbps CIR
3. 40% coverage with >100Mbps with a minimum of 10Mbps CIR.
Whether this will ignite the white-hot digital inferno that the government hopes for remains to be seen.
Communities scheduled where work is set to begin by the end of September 2015 are:
Conwy: Capel Curig, Dolgarrog, Dolwen, Llanfairtalhaiarn, Llangernyw, Penmachno, Pentrefoelas
Denbighshire:, Llannefydd, Nantglyn,
Carmarthenshire: Brechfa, Dryslwyn, Gwynfe, Madox, Rhandirmwyn
Monmouthshire: Crucorney, Dingestow, Ponrilas, Shirenewton, Skenfrith, Tintern, Trelleck, Wolvesnewton
Pembrokeshire: Angle, Castle Martin, Clarbeston, Cynghordy, Llanteg, Llawhaden, Maenclochog, Martletwy, Puncheston, Rhos, St Nicholas
Powys: Beguildy, Llananno, Llangunllo, Llanwddyn, Painscastle, Pantydwr
Wrexham: Llanarmon Dyffryn-Ceiriog