Following the broadband money

BDUK moves towards crisis

with 7 comments

Two usually reliable sources have said that the decision mentioned below is unlikely to relate to BDUK’s application for blanket approval for exemption from scrutiny under EU state aid rules.

One suggestion is that it relates to the UK’s postal service. This seems possible, given the information revealed in the linked document.

BDUK and DG Competition, which rules on the application, have not replied to requests for details.

Given that some high profile political careers depend on delivering “superfast” broadband to all in the next three years, it is likely that there is some pressure to bend the rules.

Getting blanket approval means up to 45 procurement contracts, most of which are expected to go to BT, will not receive independent scrutiny. It is also needed because few, if any, proposals so far, are believed to meet EU rules on state aid.

Approval is crucial to freeing up BDUK’s £530m if the UK is get get close to culture secretary Jeremy Hunt’s goal of the “best broadband in Europe by 2015”.

Approval would also scupper plans by some small independent network operators (altnets) to  sue local councils if they give money to BT (or another listed supplier) and BT then targets areas the altnets have said they will serve.  Their argument is that councils’ action would breach state aid rules. These prohibit using taxpayers’ money in areas where there is a competitive market.

Some altnets offer wireless broadband access, but there is no official record of their coverage. Local authorities are meant to consult on where basic coverage ends and so-called Next Generation Access starts. Some have been reluctant to do so. As a result, councils could face objections as soon as they issue contracts. This would delay network builds.

In addition, it would be extremely difficult to audit precisely where the money was spent, given that many “white” spots are surrounded by so-called black areas, i.e. where there is a competitive market.

BDUK is wrestling with these issues, but whatever goodwill it had in the industry has ebbed away. It has also failed to get more than BT and Fujitsu Telecom (which wants all BDUK’s money in return for a £2bn investment)  to bid for work.


Written by Br0kenTeleph0n3

2012/04/06 at 07:55

Posted in Uncategorized

7 Responses

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  1. Very interesting post Ian.

    Where you say “Approval is crucial to freeing up BDUK’s £530m if the UK is get get close to culture secretary Jeremy Hunt’s goal of the “best broadband in Europe by 2015″.”

    This is not of course a binary, yes/no situation, other than of BDUK’s making.

    After the fact funding that rewards results not promises is simple, effective and low cost to administer.

    Three good reasons why BDUK does want to take that approach then!

    Guy Jarvis

    2012/04/06 at 18:57

  2. State Aid approval is I think inevitable, there’s a long list of projects that have received approval in the UK and abroad where one could raise the usual arguments against, but clever people with the time dedicated to it will have ensured it’ll pass muster. The EU is fundamentally behind spreading faster broadband in the same way we have ministers etc putting their name to it.

    The broadband guidance put out by the EU asks for clawback mechanisms in areas where the subsidy can be shown to have been unnecessary, which could cover the altnet scenario. I would expect BT to use any such money elsewhere in the same contract area should that arise.

    yarwell (@yarwell)

    2012/04/07 at 09:46

    • Who will have time, energy, money and motive to do the audit that would show the the subsidy was not needed, and then prove it in court? Not the local authorities, I suspect, nor the firm that gets the business. In a competitive situation the altnet would have to spend a lot of money just to bid. Why would they throw good money after bad, just so BT could spend the money “elsewhere in the same contract area”?

      Ian Grant

      2012/05/06 at 19:44

  3. Of course, Mr Hunt is now likely to be nowhere to be seen by 2015. Has any minister or civil servant ever taken accountability for the clusterf*ck that is UK broadband?


    2012/05/05 at 14:39

  4. There’s also nothing like setting your targets after starting work (for meeting your targets) – “best broadband” scorecard promised early 2011, now estimated summer 2012 from Ofcom.

    It’s a bit like placing a bet on a horse race when it’s half way through.

    What’s the betting “best” will be stretched so far away from the normal English usage that it might as well be a Sankrit word?


    2012/05/05 at 14:42

  5. […] Fujitsu have signed contracts to supply broadband infrastructure under the BDUK framework following months of negotiation between the department of culture media and sport and the European Commission’s competition […]

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