broadband

BT Rural Broadband Roll Out Slammed By National Audit Office

Government audit report says BDUK delays are suffering from a lack of competition

On by Tom Jowitt 0

The rollout of superfast broadband into rural areas has been panned in an official report by the National Audit Office (NAO).

As expected, the NAO lamented that fibre deployment into rural areas is running two years late, and is not providing value for money because of a chronic lack of strong competition.

BDUK bashing

The coalition government has pledged to have the best broadband in Europe with 90 percent coverage of the country by May, 2015. BT is rolling out fibre to 66 percent of the UK, but deemed the remaining third of the UK to be “not economically viable”.

In order to avoid a digital divide, the government in 2010 set aside £530 million for the Broadband Delivery UK (BDUK) scheme, with local councils, BT and other European bodies providing the remaining funding. But deadlines have slipped badly, and in June the government pledged another £250 million in public funding. It nudged the coverage target for superfast broadband to 95 percent of the UK population, but t5he expected delivery date has slipped to 2017.

This delay was not lost on the NAO and it raised a number of concerns it had about the entire rural rollout of superfast broadband in the UK, which is managed by the Department for Culture, Media & Sport (DCMS).

“The rural broadband project is moving forward late and without the benefit of strong competition to protect public value,” said Amyas Morse, head of the National Audit Office.

Late and no competition

The report also raised serious concerns about whether the project is providing value for money, because the fibre deployment is effectively a one horse race, with only BT left competing for all the BDUK contracts. As of June 2013, 26 rural broadband contracts have been signed, all of them going to BT.

“Competition has been limited,” the report said. “The design of the competitive framework had the advantages of ensuring affordability and transferring risk but, together with state aid conditions and other commercial factors, led to potential suppliers withdrawing from the bidding process. BT was left as the only active participant in the framework and is likely to win all 44 local projects.”

Even worse, the auditors wondered whether BT is actually contributing the funds it said it would, questioning if the telecoms giant was overcharging the government, a claim BT has denied in the past. The auditors said it does not have “strong assurance that costs, take-up assumptions and the extent of contingency contained in BT’s bids are reasonable.”

“The project funding contributed by BT has so far been lower than originally modelled – the Department now expects the company to provide just 23 percent of the overall projected funding of £1.5 billion, some £207 million less than it modelled in 2011,” the auditors said. “At the same time, by the end of the programme, BT is likely to have benefited from £1.2 billion of public money.”

BT strikes back

BT has taken issue with the NAO’s “odd” figures. The firm told TechWeekEurope that rather than the 23 percent the NAO says it has committed, according to its own figures it is more like 38 percent.

“On the specific claim that BT is likely to contribute 23 percent of the total funding or some £356m, we would like to highlight we have committed more than £500m to date and that there are still a lot of contracts to be signed – in fact, more than a third,” said BT, adding, “BT’s fibre programme has been one of the most efficient in the world with the company going further and faster than industry experts thought possible. BT has applied these cost efficiencies to its BDUK work and so the company is delivering excellent value for money.‪”

The former incumbent also addressed the issue of lack of competition, saying there were nine companies at the start of the process, but they dropped out when they looked at the realities of rolling out fibre into rural areas.

The BDUK Framework attracted just two bidders from nine invited. These were BT and Fujitsu. And Fujitsu pulled out in March, leaving BT to scoop up all the BDUK contracts.

“There was strong competition when prices were set at the start of the process and that has ensured counties have benefited from the best possible terms,” said BT.

“Deploying fibre broadband is an expensive long-term business and so it no surprise that others dropped out as the going got tough. BT on the other hand has stayed the course and invested significant sums in rural Britain even though the payback period in such areas is longer than in the first two thirds of the UK which has been funded by BT alone.”‪

Eric Doyle
Author: Eric Doyle
Editor, ChannelBiz
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