Br0kenTeleph0n3

Following the broadband money

The NAO report on BDUK: what Miller needs to do now

with 10 comments

Miller - knowledge gap?

Miller – the search for value begins

It is sad but true that the National Audit Office’s investigation into the value for money from the BDUK Framework procurement has largely vindicated Br0kenTeleph0n3’s reportage over the past three years.

Fearing a repeat of the folly and waste that was the NHS’s National Programme for IT, we hoped that following the BDUK money would alert ministers and civil servants to the fact they were under scrutiny, and that they would be resolute in defending the public interest.

The NAO’s report shows, with understated clarity, that Br0kenTeleph0n3 failed to achieve that goal.

The NAO found that, despite ministers’ and civil servants’ best efforts, BT’s network will benefit from £1.2bn of taxpayers’ money, that BT’s monopoly outside the cities will be further entrenched, that there is no clear way here to assess value for taxpayers’ money, and that whatever BT delivers under the framework will be late and less than “the best broadband network in Europe” the nation was promised.

The NAO offered a number of recommendations and lessons learned, one of which was to benchmark prices to industry standards or a ‘should-cost’ model early in the process. This would inform the assessment of all supplier costs.

The Public Accounts Committee (PAC) will meet to discuss the NAO report on Wednesday. Even as the first drafts of the NAO’s report were doing the rounds in Whitehall, culture secretary Maria Miller moved to limit the damage.

Miller has summoned six would-be community network operators (altnets) from the “Final 10%” to meet BT and BDUK representatives to thrash out a potentially less embarrassing scenario than BDUK has proved. She hopes to offer that as a sop to the PAC.

The six altnets are bidding for money from the £20m Rural Community Broadband Fund (RCBF), which is available only to projects in the “Final 10%”. The amount is trivial in the next generation broadband accounts, and besides, the department of the environment, food and rural affairs (DEFRA) is putting up half.

BT has already said serving these areas, indeed the whole “Final Third”, is “uneconomic”; why then is it fighting so hard to keep out altnets? Why has it insisted that the speed and coverage details of its BDUK-funded roll-out are kept secret?

The official version is that BT’s roll-out is “subject to survey” i.e. it doesn’t know where its assets are or what condition they are in, and that therefore its plans may change. Such a change might result in BT overbuilding an altnet’s network, which is illegal under state aid rules. Better therefore not to risk BDUK money competing with RCBF money by stopping the altnets from building, at least until BT’s finished its bit.

Or, since altnets have to give BT an effective veto over their plans, to let BT cherry-pick the few villages and hamlets that might provide the altnets with a viable user base, and leave the “Final 2%” to the altnets and the satellite operators to mop up after 2017.

This is a seductive argument in terms of political risk. But what if Miller is more imaginative? These six altnets could be the true pilot projects that point the way to a different status quo for rural broadband.

More importantly, they could provide real benchmarks against which to measure BT’s performance. That alone could offer a real shot at extracting  value for taxpayers,  fulfill an NAO key lesson, and provide Miller a meaty bone for the PAC.

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Written by Br0kenTeleph0n3

2013/07/13 at 16:39

10 Responses

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  1. Has any altnet said what amount of taxpayers money would be required to serve a particular area with FTTP? Clearly dependant on geography and current speeds.

    No one mentions the ISPs in these discussions, they provide the income to Openreach and must have a view on it’s activities.

    Somerset

    2013/07/14 at 08:07

    • The main ISPs have their own issues. We know about Liberty taking over Virgin Media, so there’s little to say until that’s bedded down. Even then, VM enjoys a cosy duopoly with BT in the cities, as evidenced by their collusion in stopping Birmingham’s SuperConnected Cities project. Sky is fighting with BT over TV rights. TalkTalk has complained formally to Ofcom about BT ripping off everyone on wholesale line rentals. Sky and TalkTalk depend on Openreach’s infrastructure for local access. Why would they risk an even worse performance by Openreach by signing up to support the altnets?
      WLRperformance0713
      Perhaps we’ll know more when Ofcom publishes the results of its consultation on Wholesale Broadband Access Reviewand Approach to Setting LLU and WLR Charge Controls in spring next year.

      Br0kenTeleph0n3

      2013/07/14 at 10:01

  2. Yes, Ian, what a shame. I and a few others would change “The NAO found that, despite ministers’ and civil servants’ best efforts” to read ‘through ministers’ and…..”

    If BT cannot ‘assess’ the SCT as they apparently have lost control of much of the national assets they were given at privatisation, how can they possibly consider the “Final Third”, to be “uneconomic”? What happened to the OMR data on their roll-out plans up to 2015 that BT are supposed to have provided to LAs? Did this exclude the ‘final third’? My understanding was that “that therefore its (BT’s) plans may change.” is ruled out by the terms set down for the OMR.

    I hope Miller challenges this. It will take some firm and binding conditions to get the ‘altnets’ to play in a major way.

    Somerset – many ‘altnets’ fund through connection fees and monthly subscriptions to a large extent. I believe HPI offered the Isle of Wight Council a virtually free ‘self-funded’ 40mb wireless coverage (declined, I believe) with most of the Council’s £3million BDUK spend to be spent on hospitals and the like – but obviously a BT ‘cherry pick’ there would trash the plan.

    mike phillips

    2013/07/14 at 10:13

    • There is wireless coverage across most of the Isle of Wright now.

      If connection and monthly fees were enough to make a strong business case then altnets would be building everywhere. But it is not that straightforward, hence they ‘cherry pick’ like any business. My question was what government funding would an altnet need to build in an area with FTTP. You also have to consider that it takes time to gain customers as people wait for existing contracts to end and you have to have a good product, particularly with ISPs bundling.

      Somerset

      2013/07/14 at 15:09

      • You might wish to look at B4RN – the answer to your question really is how long is a piece of string/fibre? I’m sure not one altnet will be prepared to divulge base costs on the NDA principle, but the costs depend on where the nearest suitable node is, who owns it, what its the ‘terrain’, how far apart are the potential customers and many other factors.

        Do we know which altnets are to be at the meeting? Do we know that all are planning FTTP or FTTC or wireless?

        The latest blog by Philip Virgo http://tinyurl.com/owjkg5s about the behaviour of BT in Lancashire makes alarming reading, and is, as I understand the rules, in breach of EU state aid rules which presumably means BT have to do Dolphinholme as a ‘commercial roll-out’ – an area they have previously publicly declared ‘no go’ economically. Draw your own conclusions, Mrs Miller.

        mike phillips

        2013/07/14 at 16:05

  3. […] prior negotiating positions: as noted by reader Mike Phillips, the councils last year ran their open market consultations to identify the so-called ‘white […]

  4. Are suggesting this is a sideshow so the following points can be ignored;

    1) Director of BT Group Strategy made an unambiguous offer of £1bn extra capital (not opex) on June 12th 2012 to the House of Lords Communications Committee. NAO have found this to be closer to £356m capital, and BT can still capitalise labour and common costs as part of this calculation.

    2) NAO have found the costs are much much less than the £100k per cabinet and millions per exchange claimed by Openreach in public throughout Autumn 2012. If the total Northern Ireland cabinet/path costs – is £37k – £48m/1265 paths, why is the UK number of £61k acceptable to BDUK? There are 30,000 paths to be done. That is a big contingency or it could be that contingency employing another 1,000 ex-soldiers bringing the date forward.

    3) BT claims the day after the NAO report that value for money was established by concessions given in the early contracts for Rutland, Cumbria, North Yorks etc, yet these contracts were not examined by NAO study. Can for instance the £28,900 cabinet cost be verified in the smallest area Rutland? If the total Northern Ireland cabinet/path costs – is £37k – £48m/1265 paths, why is the UK number of £61k acceptable to BDUK?

    4) If a cabinet constitutes 36% of a path cost as per NAO report, – then 36% of the NI £37k – £13,320 -which is just about the subsidy offered and less that what SLU providers need. The numbers improve if you exclude greater Belfast.

    Is this the best that can be done?

    NGA for all

    2013/07/15 at 12:30

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