Following the broadband money

BT to broadband councils: Ask yourself – do I feel lucky?

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PAC chairman Margaret Hodge: seeking direction

PAC chairman Margaret Hodge: seeking direction

So, what did we learn from Round 2 of the Public Accounts Committee (PAC) v BT/BDUK (rural broadband division)?

Hopefully not as much as we shall learn in the promised Round 3, but it had better come soon before we all lose interest and find better things to do with our lives, like learning macramé.

What did emerge were clearer reasons for BT’s secrecy. Former Ofcom official Sean Williams, who spoke for BT, said that the equipment BT is installing in the BDUK intervention areas is exactly the same as that which it is installing in its commercial roll-out. Therefore revealing the price it pays for equipment in the BDUK areas would help its competitors in the rest of the country.

This is disingenuous, perhaps delusional. No-one wants to duplicate BT’s copper network, so the price of a DSLAM and its path is irrelevant to competitors. The few firms that do want to provide connectivity in rural areas want to run fibre to the home or to a distribution point (call it a digital village pump if you will), and from there use high speed wireless to the home.

They would find it helpful if they could use BT’s ducts and poles and cabinets to do some of it, but as they would be able to offer faster speeds than BT’s copper, BT wants to keep them off its passive infrastructure at all costs.

Most would also like BT to backhaul their local traffic, but few can afford to pay the charges BT is asking to build (or light) the connecting fibres.

Someone should be checking these costs, because Ofcom has allowed BT to set its own prices for wholesale fibre access. In consequence Ofcom is now having to investigate a TalkTalk complaint that BT has run a margin squeeze on the product.

More to the point, in many cases BT fibre already goes to rural villages and towns, but only to schools and other public sector enterprises like hospitals and clinics. It would have been extraordinarily short-sighted of BT to run only a single fibre pair to each of these places, so there are likely to be spare unlit fibres in the neighbourhood. These could be put into service in short order at marginal cost. If someone was paying attention.

Even if BT was that myopic, there is likely to be spare capacity on the fibre pair due to different peak times for business and recreational traffic. Even if this got congested, well, BT now knows how to make ordinary fibre carry 1.4Tbps over distances of more than 400km. That should be enough for most rural communities, at least in the short term.

The other thing we discovered is BT’s employment of Catch-22 with respect to post codes. Williams said BT’s policy is that local councils are free to publish maps that contain BT’s proposed speed and coverage data down to seven-digit post code level. This is precise enough to say what upload and download speeds each and every premises in the country will be able to get. Two, Northamptonshire and Dorset have apparently done so. But it’s up to councils to decide.

Most other councils have published speed and coverage maps down to five-digit post code granularity. This is because, Williams said, the finer details revealed in the seven-digit post cost templates are secret and covered by the non-disclosure covenants in the contracts councils have signed with BT. Publishing them would break the contract and theoretically open them to legal action from BT.

Catch-22, or as Dirty Harry said, “You have to ask yourself a question – Do I feel lucky? Well, do you?”

Unfortunately none of the MPs on the PAC sought an assurance from Williams that BT will not exercise its rights if councils publish the speed and coverage details at the seven-digit resolution. Hopefully they will do so in Round 3.

One bit of good news that almost got lost in the noise is that BDUK’s analysis of early roll-out invoices suggest that BT has over-estimated by about one-third the associated management overhead costs.

It’s early days yet, and as the BT installation teams gain experience, those savings should grow. One hopes that they will not be used to finance the new £50m expansion of BT’s city fibre networks.

See the Round 2 video here starting at 16.53.20.

Written by Br0kenTeleph0n3

2014/01/31 at 06:54

5 Responses

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  1. Ian,

    Does Sean Williams represent BT, or Openreach (OR)? I continue to struggle on this one as, If you recall, it is OR who provide infrastructure not BT (making a point here).

    John Nolan

    2014/01/31 at 07:52

    • According to his LinkedIn site, Sean Williams is “Managing Director, Strategy, Portfolio, Legal and Regulatory Services at BT Group plc”. I think that means he speaks for BT Group, of which Openreach is an operating subsidiary. Thus when he speaks, he also speaks for Openreach. Sean acknowledged this before. He told the House of Lords that Openreach’s money goes into a common pool, and it competes with other BT divisions for cash for capital and operating expenses. Thus for all practical purposes, BT is vertically integrated, and that function separation is a compliance fig-leaf to hide the fact that BT can choose where it makes profit – the issue at the heart of the TalkTalk complaint about the alleged margin squeeze on wholesale fibre access. But I suspect you knew that.


      2014/01/31 at 08:35

  2. PAC is alarmed that if in changing a light bulb, £1,000 costs can be incurred then the supplier can send an invoice. You can look and challenge but if the hours are recorded, taxi booked and a car full of managers dispatched, the ERDF auditor will say it is ok as the events are fully itemised.

    BT confirmed there costs would be cNI +12% – but dodgily enough for the cabinet – not cabinet and path. He did not unfortunately confirm the subsidy would be NI subsidy (excluding greater belfast) +12% which would bec£15k per path and cabinet. NAO has identifed the BDUK average at £47k subsidy per cabinet and path, but the table is in proportions so it needs studying. All numbers are in the public domain. If Margaret gets in the habit of saying cabinet and path she find them out. Replay the tape, the dodge, avoidance on cabinet/path is fascinating.

    PAC are closing in but PAC has never changed the price of fish, so some other external factor is needed.

    BT shareholders (I am one) should be concerned that their executives are wishing to use confidentiality agreements to hide their preference to spend state aid on project management rather than on refreshing the rural network with revenue earning assets at the Governments expense. That 1/3 project management costs in Norfolk Suffolk is cost inflation of the crudest kind. It is allocating middle managers tasks rather than employing more apprentices to improve the network.

    I think Labour are staying quiet because the Unions are choosing to protect current members rather than push for new lower paid members.

    NGA for all

    2014/01/31 at 10:05

  3. Wifi solutions in villages are not practical – having examined in some detail this solution for our villages unless you are going to cut down every tree over 8 meters – you just can’t guarantee everyone will get a service. You also have to install repeaters to boost the service round the village which require public power supplies which are too expensive to install. Small hamlets with a church tower are practical as in the case of WiSpire but speeds are very low.

    Mel Bryan

    2014/02/13 at 13:49

  4. […] 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, […]

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