Archive for January 2015
The National Audit Office (NAO) report on the BDUK’s former Rural Broadband Programme, now renamed the Superfast Broadband Programme, contains elements that might lead to cognitive dissonance.
It reports that BDUK commissioned Atkins, a primary supplier of services to government, to look at BT’s costs to provide high speed broadband in rural areas. After looking at a few sites in Suffolk, Atkins concluded “BT had charged Suffolk nearly 20% less than would hypothetically be charged by another efficient supplier, in part reflecting that BT benefits from substantial national bulk buying power compared with other providers.” Paragraph 3.10)
That’s good news, right? But it seems there’s more joy to come for taxpayers. In Paragraph 5 NAO reports “BDUK’s experience of actual costs in phase 1 has led to BT agreeing to submit lower costs in its financial model for phase 2.”
However, it carefully notes that BT was picking low hanging fruit in Phase 1, namely peri-urban areas rather than deep rural ones where is cost to reach them is likely to be higher, unless you use a satellite.
NAO also suggests BT got other sums wrong. BrOkenTeleph0n3 revealed that BT’s planners estimated BT would break even on a 20% take-up in 12-14 years. “Take-up of superfast broadband so far has been significantly faster than forecast by BT in the phase 1 contracts. Take-up has risen to more than 20% already for two non framework projects”, the NAO found. This “should bring greater coverage than contracted, as local bodies will be able to extend their rollout with remaining funds,” it says.
BT is the only framework supplier left, and 43 out of 47 county councils have opted to use the framework to procure Phase 2, although 10 may elect to hold money back for Phase 3, the final 5%.
“Overall, the effect of the first 2 phases will be to reinforce BT’s already strong position in the wholesale market for broadband infrastructure (the Wholesale Local Access Market). BT’s assets and infrastructure will benefit from approximately £1.7 billion of public sector investment although BT must maintain these assets at its own expense. BT is also required by regulatory conditions to provide wholesale access to other suppliers.”
The NAO also revealed that the public will benefit from clawbacks due to higher than expected take-up for only seven years. “After these seven years, the supplier will keep all of the extra wholesale profit.”
BT amortises its fibre over five to 20 years, and its exchange equipment over three to 13 years.
BTW, in its 2013 rural broadband report on page 35, the NAO said “The Atkins ‘should cost’ model for Northamptonshire is three per cent higher than BT’s actual bid for the area. Atkins was not able to complete analysis of a second local body area, Suffolk, due to the difficulties it encountered in modelling a more complex technical solution. Atkins’ model is the only model available to us that has tried to match a corresponding BT bid identically.”
The hour-long Public Accounts Committee interview on the NAO report, featuring DCMS, BDUK and BT officials, took place on 28 January 2015. You can see the video here.
There are still some people who are interested in seeing what’s happening to the near £2bn of taxpayers’ money given to BT to roll out next generation broadband in the “Final Third”. Many of them probably sit on the Commons’ Public Accounts Committee, which is taking its third stab at finding if BT is delivering value for money this coming Wednesday.
The 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, policy and portfolio, Sean Williams, who was the source of much of Ms Hodge’s frustration, gets a third act in front of the committee.
Supporting players are DCMS boss Sue Owen, BDUK CEO Chris Townsend and superfast broadband programme director Andrew Field, and Openreach MD for infrastructure delivery Kim Mears.
In its preamble the PAC said its reports on the rural broadband programme in September 2013 and April 2014 “raised concerns over lack of published information on BT’s plans for superfast broadband coverage, the availability and transparency of cost data and the level of competition secured throughout the programme. This recall session will examine the transparency of cost and rollout information and explore whether the department has done enough to promote greater competition for phases 2 and 3 of the programme.”
The curtain for the hour-long show goes up at 2.15pm on Wednesday 28 January 2015, Committee Room 15, Palace of Westminster. If you can’t make it in person you can follow on Parliament TV: Rural broadband: progress update session.
The government is looking at how to get high speed broadband to urban businesses despite state aid rules that appear to preclude using some of the £2bn of BDUK money to do so, culture secretary Sajid Javid told MPs on the Culture, Media & Sport parliamentary committee yesterday.
Javid said DCMS is talking to stakeholders, including the Federation of Small Businesses, which this month produced a second damning report on broadband, to resolve the situation.
Javid also revealed that the contracts between BT and country councils for rolling out “superfast broadband” have claw-back clauses that come into effect when take-up reaches 20%.
Javid added that the government was updating the Electronic Communications Code as part of a deal with mobile network operators to extend mobile coverage to 90% of the UK land mass announced late last year.
In February 2013 the Law Commission recommended changes to provide a clearer definition of the market value that landowners can charge for wayleaves, resolve inconsistencies with other legislation, clarify network upgrade and sharing rights, and establish the rights of land owners and network operators with respect to access to land and removal of equipment, as well as ways to resolve disputes
This link Culture secretary Sajid Javid on the DCMS annual report opens a new window. Javid’s comments on the code are at 12.43, and on broadband at 12.53.