Following the broadband money

Cumbria broadband rejection exposes BDUK chaos

with 15 comments

There are now serious doubts over the government’s programme to get “the best broadband network in Europe by 2015” following Cumbria County Council’s decision to reject bids from BT and Fujitsu for a £40m next generation broadband network.

In a statement this afternoon, the council said it would enter fresh talks with the two firms to get the network Cumbria has been looking for all along. A decision is expected in September.

“Neither of the final tenders had completely fulfilled the original, and full, requirements of the procurement process,” it said. Despite extensive talks between Cumbria and the suppliers, the bids met neither the technical specification nor the funding terms Cumbria had called for.

To be fair, BT has been upgrading its copper network in Cumbria at its own cost. But its capabilities fall far short of what the council expects from a next generation network.

Fujitsu has still to build a public access network in the UK, and was widely expected to get the nod in Cumbria. This is said to be to keep BT on its toes and to preserve the semblance of competition for most of the £830m the government has earmarked for next generation broadband.

 How we got here

The government set up Broadband Delivery UK shortly after took power to set up the procurement and disbursement process. Following Vince Cable’s faux pas over the BSkyB bid, responsibility for BDUK shifted to Jeremy Hunt’s culture media and sport department (DCMS), whose first priority has been the London Olympics.

Public procurement specialists, believed to be as many as 20, from the audit firm KPMG were drafted in via a Treasury framework procurement deal to help BDUK. According to insiders, none of the KPMG secondees had ever procured a large communications network. However, the rate for their junior staff is reputed to be more than £1000 a day. DCMS has refused to answer Br0kenTeleph0n3’s Freedom of Information Act request to provide details of the consultants’ qualifications and day rates.

The disparity in pay and the lack of technical expertise is believed to have led to friction between the permanent and drafted technical experts and the KPMG staff. Several DCMS reorganisations have seen staff with telecoms experience moved or or out.

BDUK set up a procurement framework that was guaranteed to exclude all but the biggest supply companies. Nine were invited; two, BT and Fujitsu, are still in the running. The rest say among other things, the Ofcom-approved terms and condition that govern access to BT’s poles and ducts made for a ‘incontestable’ environment.

Neither BT nor Fujitsu has signed up formally to the BDUK framework because the European Commission’s DG Competition, which rules over state aid disbursements, has so far refused to approve it. It is believed DG Competition is doing so because BDUK’s proposed procurements would lead to taxpayers’ money going into networks that would fall short of Europe’s Digital Agenda targets. These are for a universal 30Mbps service with 50% of citizens using a 100Mbps broadband service by 2020.

This has delayed local procurements, which are to be led by county councils. Cumbria felt it could no longer wait, and set off on its own, as it is entitled to do.

The present delay is not the first. Cumbria was meant to have picked a winner in January. But it may be the last.

 What’s next

It is less clear what will happen with councils that stay with the BDUK procurements, and the money. There are some clues. DG Competition quickly gave the nod to Birmingham’s plan for a state-aided, £10m, wholesale-only, open access, fibre to the home network that will supply everything from dark fibre down to anyone who wants to resell it.

It is understood that both the UK and European authorities are less anxious about broadband network procurements in cities, where there is usually a choice of network operators, than they are about what happens in rural areas, where BT has a regulated monopoly. However, the speed with which DG Competition approved Birmingham points to a preference for the features included in its proposal.

In addition, the European Commission’s vice president and Digital Agenda champion Neelie Kroes is on record saying national regulators have to make incumbents open their networks and to sell dark fibre.

That gives BT a massive problem. Having to sell dark fibre would destroy the business case for a fibre roll-out, BT’s director of strategy Sean Williams told the House of Lords communications committee. Installing fibre is five times more expensive than copper, he said.

Williams did not provide evidence to back this assertion, but if it is the case, it is hard to understand why Ofcom has not investigated why BT is selling its copper broadband for the same price as its fibre broadband. Or perhaps it knows. After all, Williams worked for Ofcom and was, he told their lordships, responsible for Ofcom’s broadband strategy.

So it seems the UK has a stand-off. BT is religious in its determination not to sell dark fibre; BDUK can’t disburse taxpayers’ money, so a lot of voters can’t get next generation (or even first generation) broadband.

It is hard to see how this will resolve itself. In the meantime, potential investors go elsewhere, talent follows them, and the UK grows a little less competitive every day. The only winners are BT’s shareholders, but for how much longer?

The blame for this must fall on BDUK, DCMS and ultimately, the culture secretary. If Hunt could escape the sack over Sky, he is definitely sackable for this cock-up.

Written by Br0kenTeleph0n3

2012/06/14 at 22:26

15 Responses

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  1. Too many cooks spoil the broth it sounds like to me. And none of them knowing how to cook in the first place. Thank goodness Cumbria is holding firm instead of just signing off the contract. I think this is because project access was such a farce and they don’t want history repeating itself. I think they want to be sure they will get what it says on the packet this time. Last time they were promised everyone would get 1st generation broadband, and as we know many didn’t.

    This time Cumbria are promised 90% superfast, but it seems like they want proof first, and won’t just be enabling BT to grab low hanging fruit and ignore the hard bits.

    I agree with what Rory Stewart said at the Lords. He is spot on with his ‘Soft Loan’ idea. I think he is the most experienced MP on this subject we have in the UK and if he was in charge things would be different.

    I don’t think you should blame Hunt for this, I think some of the civil servants have a lot to answer for. Ultimately the culture secretary has to rely on them for guidance? Isn’t it a case of ‘yes minister’?


    2012/06/15 at 08:46

    • From what we know, it appears Hunt may have done rather better to listen to his civil servants rather than the KPMG “experts”. In any case, he bears the political responsibility for this fiasco. If it comes right, he gets the glory. He will not doubt claim it for the Olympics.

      Ian Grant

      2012/06/15 at 09:08

      • Really? who let the ‘experts’ in?


        2012/06/15 at 09:54

  2. I am struck by the doom and gloom, yes things are moving slowly, but what other procurrement process was ever fast. The authorities only found out their allocation in August 2011. The goal is to complete by May 2015, and even if all authorities awarded contacts today, does any telco in the UK have the staff to complete roll-out as early as people want?

    Birmingham has really been going as long as the local authorities, and as a smaller geographic area with less diverse needs may be easier to manage.

    At the end of the day, there is a limited amount of money from UK Gov, similar from local Gov, and a match from commercial operator. Which is always a recipe for delay, as different groups push and pull and the targets.

    Cornwall said their project which is delivering was some three years in the planning department.

    Andrew Ferguson

    2012/06/15 at 10:03

    • Birmingham has this Been going for 6 years with many partners.


      2012/06/15 at 10:17

    • As I understand it, the county councils had to submit pro forma plans to justify their requested allocations, so they did not start from scratch in August 2011. I would be surprised if some of them haven’t had this topic on their agenda since broadband first rolled out a decade ago. Your point about the availability of staff is valid. But it is also true that the government’s handling of the procurement process has driven away at least seven large and capable companies, and deliberately excluded many smaller local firms. Had they been encouraged to say in the game, how many jobs might they have created? Judging from the B4RN videos, ordinary people with a degree of common sense can be trained in relatively short time to install and connect fibre. How many people who fit that description are currently looking for work and might have been glad of the opportunity? We’ll never know. As to funding, the government has shown a staggering lack of vision. For whatever reason they have ignored alternative sources such as municipal bonds, or private sector infrastructure funds. I was in the room when the manager of one such fund offered to buy BT’s local access network; Sean Williams, perhaps wisely, was tongue-tied.

      Ian Grant

      2012/06/15 at 21:35

      • Its true, laying fibre isn’t rocket science, its easier than laying a drain in a field because you don’t have to worry about fall. It is well within every farmer’s skill set, they are probably better at it than a BT person would be because they know the land through all seasons.
        We are getting requests from people who want to know where we’re digging so they can come and help for a few hours on their day off now. I think there is a great potential currently unharvested. Some people can’t afford to work for shares, but if there had been funding available we could have paid them a fair wage, and got far more out of them for the money. More bang for your buck as Miles Mandelson said in the HOL.


        2012/06/16 at 08:07

  3. […] County Council recently rejected proposals from both suppliers, sayin it is looking for a ‘future-proof’ […]

  4. […] of competitor network suppliers met on Friday 20 July to discuss ways forward in the wake of the disastrous BDUK procurement process that saw only BT and Fujitsu left as possible bidders for up to £830m of taxpayers’ […]

  5. It is staggering that not a single government state aid lawyer appears to have been allocated to BDUK. It was obvious that a single notification would be incompatible with the Broadband Guidelines in 2008, nevermind 2012. Likewise how could BDUK not have any procurement lawyers or experts?

    These issues will surely be the centre pieces of the select committee report (which must surely happen now).


    2012/08/07 at 19:26

    • I believe BDUK relied on procurement experts from KPMG and Pinsent Mason at a cost of some £3m to ensure that the procurement process was legally watertight and presumably conformed with state aid rules.
      The DG Competition says the delay, now about eight months, is not unusual, and the matter enjoys priority and high level attention because of its precedent-setting potential for all Europe.

      Ian Grant

      2012/08/07 at 21:12

  6. […] Grant’s latest Broken Telegraph post indicates that the BDUK framework has finally run its course, having delayed the roll out of rural […]

  7. […] should also follow Ian Grant’s coverage here – he is very close to this […]

  8. […] Financial Times has come to the belated view that the BDUK procurement of next generation access to broadband is a […]

  9. […] should also follow Ian Grant s coverage here2 he is very close to this […]

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