Archive for June 2013
Communications minister Ed Vaizey is expected to sign off at least one application for funds from the £20m Rural Community Broadband Fund (RCBF) on Tuesday.
The application is from B4RN, the high profile DIY fibre to the home network in rural Lancashire. B4RN applied months ago for £875,000 from the RCBF, and is also negotiating a bank loan.
B4RN’s application, and up to 50 others, have been delayed while local councils try to establish where BT intends to roll out its next generation access to broadband and what access speeds and reliability it promises. Early reports suggested BT intends to duplicate two-thirds of B4RN’s coverage in one of the remotest parts of Lancashire.
The government has said the speed and coverage template details (SCT) in BT’s NGA contracts are commercially confidential, but it expects local councils to publish them once the BT roll-out is under way.
However, B4RN had a prior agreement with Lancashire County Council (LCC) for the county to exclude B4RN’s coverage area from BT’s plan. This meant B4RN’s application should have been gone through without reference to BT’s roll-out.
“The hold-up was down to LCC refusing to confirm (to the RCBF) they were not planning on funding BT from the main pot (of state aid) in the same postcodes, this despite our agreement,” B4RN CEO Barry Forde told Br0kenTeleph0n3.
Forde said LCC had asked B4RN to drop a complaint with the European Commission against LCC’s use of state aid to help BT overbuild a pre-existing privately funded network, namely B4RN. He agreed to drop the complaint only after LCC promised to give B4RN’s postcodes ‘immunity’ from state-aided competition from BT. Forde published B4RN’s latest postcodes as recently as April.
LCC did not immediately respond to a request for comment. If it does, we will update the story.
B4RN’s complaint is essentially the same one BT and Virgin Media used to scupper the government’s Superconnected Cities initial £150m plan to see 100Mbps fibre to the premises networks built in the UK’s 22 largest cities. This prompted the extremely well-connected blogger Philip Virgo to suggest that the two carriers be referred to the competition authorities for anti-competitive behaviour.
LCC does a lot of business with BT. Three years ago it handed BT the management of the Cumbria and Lancashire Education Network (CLEO) schools network, which Forde designed, and later signed a £40m contract for its county public service network with the telco. In 2011 it entered a £400m, 10-year joint venture, One Connect, with BT to provide back office services, a deal whose transparency an MP has questioned. BT now stands to scoop £130m from the Lancashire NGA roll-out.
Barry Forde has been in touch to say that the amount B4RN is currently seeking is £875,000, not £750,000, due to a bigger coverage area, and that I should be referring to the Lancashire, rather than Lancaster, County Council. Points noted; changes made above.
Gerry Pennell, the former CIO of the 2012 Olympics, delivered in May a secret report on BDUK to culture secretary Maria Miller, the Daily Telegraph reported last week.
According to the paper, the investigation took place amid “serious frustrations about how broadband roll out was operating”, and asked whether “radical lessons could be learnt, particularly as attention turned to delivering the final 10 per cent”.
Pennell apparently suggested DCMS needs more “commercial nous”, and worried whether BDUK has the experience to deliver the project.
According to the Telegraph, “The Pennell Report found that, overall, the current roll-out programme is going well, with 100,000 more homes and businesses getting access to superfast broadband each week, and average broadband speeds more than double what they were in May 2010.”
A job applicant might not want to tell his prospective employer just how bad things are. Accentuate the positive, they say.
Here’s what Pennell says on the inside front cover of the 2013 BT annual report: “London staged one of the greatest Olympic and Paralympic Games ever. Beyond the statistics, technology had a profound effect on how people interacted with the Games, and none of that would have been possible without BT, whose commitment to these Games was quite simply spectacular.”
Indeed, Pennell was the recipient of so much BT love and attention at the expense of the rural broadband roll-out that one blogger, the extremely well-connected Philip Virgo, speculated it might have been so ordered, if not in reality then in practice.
So leave aside the facts that most of the speed increase is due to Virgin Media upgrading its customers to 30Mbps and more, and that BT has only 1.3 million Infinity customers from more than 15 million ‘homes passed’.
If the Telegraph has reported accurately (DCMS refused to pass along a copy of the Pennell report), we will not be surprised if Miller taps Pennell to deliver the Final 10%. He has the credentials and knows just who to call on for help.
BT says the Final 10% is the most expensive part of the country in which to deliver broadband. Pennell will have £250m to cover 1.4 million homes. That is less than £180 per home, or £360, if, as Miller intends, he can squeeze local councils to match BDUK funding. Given that a BT roll-out in Staffordshire and Stoke on Trent is costing less than £58/home, that looks like plenty.
Questions have been raised over the government’s delay in publishing the speed and coverage details of BT’s roll-outs under the £1.8bn BDUK framework procurement of next generation broadband for the country.
Responding a Freedom of Information request, the department of culture, media & sport, the BDUK’s political parent, admitted taking legal advice on the publication of the so-called SCT figures. It refused to disclose the advice, saying it is legally privileged.
BT is the only supplier pitching for state funds under the BDUK framework. Sources close to the department say they believe the legal advice was that a case could be made that the public interest in offering contracts to provide broadband access in areas where BT will not build outweighs BT’s commercial interests.
DCMS confirmed that the details were kept secret under confidentiality clauses in the contract between the local authority and BT. The contract partners each kept the details, and DCMS did not keep ‘the maintained details”, it said.
“As the supplier progresses its roll-out we would expect the deployment data in the SCT to become less commercially sensitive and local bodies will publish details of the roll out,” it said. In other words, once it’s too late to do anything about it.
Publication of these details is crucial for more than 50 applications for funds from the £20m Rural Community Broadband Fund to go forward. Applicants must fit in with the local council/BT roll-out, and BT has an effective veto on council approval of such applications.
Sources with knowledge of the situation say that delays in publishing the SCT details allow BT to adjust its roll-out plan. It can ensure that no competitor will be able to service a contiguous area large enough to be economically viable. This leaves BT free to back-fill its coverage at leisure, or not.
DCMS said “The populated SCT is effectively an initial planning document, which is subject to alteration. Sometimes significant changes are made to it during delivery and its use by another commercial organisation or the general public could carry significant risk.”
It is unclear who carries the risk. Indeed it is hard to see that the contracting council takes any risk; whether BT or a competitor provides the network is irrelevant as long at the specified service is delivered. DCMS surely has no business protecting the shareholders of private companies that wish to compete to supply councils.
If alt-nets (competitors) wish to build in places where BT has not indicated a desire to build, then the council, voters and taxpayers win. If BT wishes to close out competition by building everywhere, the same applies. If BT decides to build where a competitor has already built, the council and voters win because he or she then has a choice of broadband suppliers, and the same is true if a competitor chooses to build where BT has built.
The state aid money is a distraction. The local authority can spend it only once. It should make no difference whether it spends it with BT or with an alt-net, as long as the specified service is delivered. But it is illegal to give the aid to one supplier who can then use it to compete against a privately funded company, particularly one with an existing network. (This is the objection raised by BT and Virgin Media to block the government’s original £150m Superconnected Cities project.)
That is why it is important to clarify early what BT is contracted to deliver and where so that others can take their chance. Or perhaps no-one is looking after the subscribers’ needs in this matter
It is not clear why BT is being allowed so long to plan its roll-out after signing the contract. Does it not know what assets it has in these locations, and whether they are fit for purpose? Was there not an inventory taken before it was privatised? Were these assets not maintained in the following years? Are there no records of what was done, when, and by whom? And if the work was outsourced, can BT not reconcile the suppliers’ invoices against internal audit reports to establish what it should have?
Cynics will say that’s hard work; it’s much easier to keep going back to the taxpayers for hand-outs, and managing the brand and perceptions. But it’s not a viable long term strategy in a competitive market.
Culture secretary Maria Miller may be calling for a shake-up at BDUK, the agency tasked with delivering high speed broadband to the “Final Third”, but she might do better going to Kent to beat the bushes for the Ultrafast Underriver project.
Underriver is hoping to contract Gigaclear to provide a 1Gbps fibre to the home (FTTH) service to homes in its area. They are unlikely to get >2Mbps via BT ever, despite almost £20m of taxpayers’ money going to the telco.
After first pitching the idea in the depths of winter, and getting a resounding “Yes, I’m interested” response, the organisers are now doing the hard graft of signing up customers. Gigaclear won’t move until it has 190 firm customers, and the organisers are 60% there.
Mike Clyne, who is leading the project, says progress so far is normal, but he is looking to push so that the diggers can move in.
He faces two main problems: ignorance and apathy. To reduce ignorance levels the organisers have sent out FAQs and their answers.
So why are some people being shy?
“Anecdotal evidence seems to primarily fall into two categories. The first is about cost and the second is ‘do I need more internet speed?’,” he says.
Taking the cost issue, Gigaclear is offering 50Mbps symmetrical plus phone line starting at £43/month plus £100 connection fee, and a 1Gbps for £69/month. That’s about 2.4x what TalkTalk is advertising (£18.00/month), but likely 25x what TalkTalk could possibly deliver to these homes.
As the speed question, the real question is What’s your time worth? That’s pretty easy to answer. A more subtle question is, What could you do that you can’t do now? That requires imagination and perhaps courage to take advantage of the service and change your life.
By the by, Clyne says the local parish councils have raised Underriver in their discussions of broadband issues. “Sevenoaks District Council have also listed our project on their website. Kent County Council have declined our request to list the Ultrafast Underriver project on their website.”
Rather than lose the £10.7m earmarked for Edinburgh under BDUK’s Urban Broadband Fund, The Scotsman reports the city’s fathers have reframed their bid as follows:
£2.7m for wi-fi in public transport and council buildings; £3m for vouchers for small businesses; £4m to support start-up businesses in “key sectors” such as the creative industries; and £1m for an online archive of programmes and reviews from previous Edinburgh festivals.
Edinburgh councillors were forced to this after BT and Virgin Media complained to the European Commission that Birmingham’s Superconnected Cities roll-out would violate state aid rules, and BDUK had to suspend the entire £150m programme while the Eurocrats considered their verdict.
The government’s recent review of major projects warned that both the UBF and the Next Generation Access projects are amber/red-lighted, ie. in danger of failing.
If it’s accepted, it’s hard to see how it would contribute to the UBF’s goal of getting 100Mbps services into the UK’s biggest cities.
The cities that are destined to share the loot may never see it if the decision comes after the 2015 UK election, so Edinburgh is at least trying to rescue something from the UBF debacle.
Conservative Technology Forum CEO Philip Virgo has posted a number of questions the National Audit Office may prefer to ignore in its investigation of whether the BDUK process will deliver value for the £1.8bn at risk.
I suspect that Virgo’s questions are slightly misdirected; the Public Accounts Committee is, I believe, the right forum to raise these issues.
Culture secretary Maria Miller is already apparently fighting for her political life, given the number of strenuously denied reports that DCMS is going be shut. She may be seeking an elegant way out of the swamp her civil servants have landed her in.
If so, she could ask the European Commission’s DG Competition to take an urgent look at the BDUK guidance to local authorities on how to deal with RCBF bids. She could confidently expect a verdict that finds the guidelines might lead to an uncompetitive market in the Final 10%.
That would give her an excuse to clean house, get BT to say what it will deliver openly and upfront in its taxpayer funded roll-out, provide a stick with which to beat BT if it doesn’t deliver on time and on budget, and garner some credibility to get fresh investors into the market, and pin the blame for any delays on Europe.
Best of all, it could save her and communications minister Ed Vaizey’s face, although Ed’s will have egg all over it.
The government is refusing to disclose the speed and coverage details of BT’s next generation broadband roll-outs in rural areas, preventing community network operators from finding ways to provide services where BT will not build.
This is disclosed in a letter from communications minister Ed Vaizey to next generation broadband lobbyist INCA CEO Malcolm Corbett. Vaizey said these details are regarded as “supplier confidential information”.
Br0kenTeleph0n3 understands that DCMS has sought and received legal opinion on the matter. It has asked DCMS in a Freedom of Information Act request to confirm this and to say what advice was given. DCMS has until 2 July to respond.
Normally reliable sources indicate that the advice was that the public interest now outweighs the supplier’s commercial interests, and that therefore the government can publish the contracted speed and coverage templates (SCTs). Knowing the precise “no build” areas will enable others to fill in the gaps. BT is currently the only supplier to win supplier contracts under the BDUK procurement framework.
“I cannot understand how (keeping the SCTs secret) can possibly be in the public interest,” Corbett said.
Corbett wrote to culture secretary Maria Miller earlier to express concerns over the commercial confidentiality over the SCTs. He said this secrecy endangered independent privately-funded projects because they could face being overbuilt by state-funded BT.
A further concern was that new guidance issued by BDUK gives BT an effective veto over community-led RCBF projects. The guidelines allow BT to do an impact assessment of Final 10% bids on its roll-out before councils can award a bid.
In his reply Vaizey says, “Any project has the opportunity to disclose their plans during the mandatory public consultation held prior to all state aid decisions. Publicly-funded projects are prevented by the state aid rules from overbuilding other projects which have been notified at that point.”
Corbett says this is correct but points out that the reviews took place several years in advance of the final deployment. “It is reasonable to expect operators’ plans to change. BT’s plans certainly will change. BT’s changes are apparently entirely acceptable. Independent operators’ plans will be ignored.”
BT’s speed and coverage plans for BDUK work are “subject to survey”. Further, it appears that even final contracts may be renegotiated.
INCA members have used the Freedom of Information Act to ask a number of local councils for the SCTs. “They are refused,” says Corbett. “Effectively it means that the locations that BT is being paid by the taxpayer to deliver to, along with those that are out of scope, are confidential.”
According to the BDUK guidelines on RCBF bids, where the bid overlaps BT’s coverage area a lot, the local council can ask BT to include the rest in its roll-out. Where the bid only partially overlaps, the council can renegotiate BT’s contract. Changes to the value of the contract with BT will depend on the “materiality” of the changes. (See below for more on materiality.)
Where there is little or no overlap, the council must issue a new tender in which BT is allowed to compete. BT will know precisely where its competitors plan to build and how much it is likely to cost; the bidders will have no such insight into BT’s coverage or its likely costs to extend its roll-out.
BT can use marginal costing to price what is effectively an extension to its existing network, but other bidders will have to bid a fully-costed price. BT holds another ace; the cost, terms and conditions of using its ducts and poles drove Geo and all other invited bidders out of the BDUK procurement framework. If they couldn’t make the sums work, it is unlikely community network operators will be able to.
A further obstacle for RCBF bidders is that they must fund the entire build upfront. They can then apply for a maximum of 50% of their costs to be met from the RCBF fund. BT on the other hand, can negotiate for ‘progress payments’ to help its cash flow.
Further, BDUK estimates that state aid intensities for local broadband projects will vary from 53% to 89%, with an average of 71% across the country, and it may go higher for ‘hard to reach’ places like the Final 10%. So BT has to find less than 50% of the project cost whereas its would-be competitors have to find 100% and claim back half.
Corbett says Vaizey has asked for a list of potential projects and to meet potential investors. “I would be happy to help arrange such a meeting but I can’t see why anyone would invest under these circumstances,” Corbett says.
Vaizey could also ask his colleagues at Defra and BDUK who have received more than 80 RCBF applications. Of these 52 have been asked for more details, and four have been approved for funding. The first approved, at Rothbury in Northumberland, will see BT scoop £460,000 of RCBF money.
Corbett believes the government’s position would be more credible if it were to declare where the Final 10% areas are, based on information it already has, and to encourage more private and community investment by guaranteeing there will be no overbuild funded by the main programme.
“This will have two significant effects: it will signal that the government is serious about competition and investment to help address the Final 10%; secondly it will help allay the very serious concerns about how to obtain value for money, at least in those areas, if not the main programme.”
The National Audit Office is expected to release a highly critical report on the value for money that the BDUK process will achieve. The Public Accounts Committee is rumoured to be lining up BT CEO Ian Livingston and BDUK CEO Rob Sullivan to answer questions arising from the NAO’s report.
RCBF projects can only be integrated into an existing Call Off Contract under change control if the change does not constitute a material change under procurement law (otherwise a new procurement will be required).
Local Bodies will need to form their own view as to whether the proposed change to the Call Off Contract would be considered to be material under procurement law. The current materiality test is set out below. BDUK will be issuing further guidance concerning the application of the materiality test in the near future.
Under current procurement law the test of materiality involves an assessment of the following non-cumulative factors (known as the Pressetext test):
Does the change demonstrate an intention to re-negotiate the essential terms of the contract (risk allocation, price etc)?
Has there been a change that could have affected the tender outcome or affected a bidder’s approach to their tender submission?
Has there been a change that could have altered who decided to respond to the original call for competition?
Will there be a shift in the economic balance of the contract in favour of the contractor?
Will the change increase the scope of the contract “considerably”?
Was the change provided for or contemplated under the original contract?
Local Authorities should note that the Materiality test applies to all additional funding added to an original county project on a cumulative basis, therefore any other additional funding that has already been added to an original procurement should be taken into account when undertaking the Materiality test.