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Public Accounts Committee calls for delay to next wave of broadband projects
Monday 03 March 2014 11:04:36 by Andrew Ferguson

Broadband as a utility service is a not even a teenager for the vast majority of people, but its rapid adoption is a testament to how disruptive this information conduit has been to daily life. Alas the rush to improve the availability of superfast broadband across the UK is something that is creating lots of debate where the majority are not discussing the benefits and encouraging take-up but complaining about the amount of money BT stands to make once it submits its invoices for the current round of projects.

The Public Accounts Committee has been perhaps the most vocal high profile complainer and an unnamed spokeswoman was quoted by the BBC last week calling for how the new (or not so new) £250m pot to take the UK from 90% superfast broadband coverage to 95% superfast coverage to be delayed until a full analysis of the current BT projects can be carried out.

"It appears with this £250m that local bodies can simply decide to extend contracts with BT where they are in place. This is just not good enough," a PAC spokeswoman told the BBC.

"We want to see clearly what the economies-of-scale savings for the first tranche of £1.2bn will be before contracts are extended or competed."

PAC spokeswoman talking to the BBC

Alas this means that we are looking at 2016 or later by the time BT has presented its invoices and finished the existing contracts, followed by months of analysis by the National Audit Office. In a traditional procurement process this is generally fine, but the broadband world is moving at such a pace, that adding a two year delay to planning for the next phase would be tantamount to sabotage.

What is odd is that the PAC is wanting to learn what the economies of scale savings are, while at the same time as criticising individual councils for awarding the contracts to BT. This is in addition to the constant using of Northern Ireland cabinet pricing and projecting it across the UK, the problem being that the NI project also involved a good number of high density urban cabinets, which may have skewed the costing compared to the heavily market town and large village areas that the current BDUK projects are covering.

Aside from a handful people who appear fundamentally opposed to BT receiving any subsidy, which it will not get until it produces the shoeboxes of receipts for each project, we suspect most of the public just want a solution to be available and for their existing provider to be able to offer them an upgrade. We are seeing an expanding school of thought calling for the price of fibre based broadband that is below superfast speeds to be sold at the same exact price as the ADSL2+ based services on the premise they have paid £15/month for up to 16 Mbps for years, but got 2 Mbps so why should they pay more now to get the 16 Mbps they were promised years ago.

Comments

Posted by ValueforMoney over 3 years ago
If your check DETI press releases you will find that numbers for outside greater Belfast are in fact less.
BT promised they would include the full benefit of the commercial roll-out, but are now saying to the BCC that priced the Framework assuming they would win one bid.
Most folk do want the solution, but most folk do not wished to be ripped off in the process.
The 35% PM saving identified is approx £70m which is only the start. Given every £6m is rights to a premiership game, full transparency is needed.
Posted by themanstan over 3 years ago
Problem with politicians is they often understand the difference between "good value for money" and "best value for money", two very different concepts.
Posted by ValueforMoney over 3 years ago
@themanstan and it would appear in this case BT Group are unable to understand that state aid is for gap funding of incremental capital costs which need to be sufficiently transparent to prevent distortions in other markets.
I understand the process invited BT to attempt to charge an average subsidy of £47k per cabinet and fibre path (as per Table 11 of NAO), but the definition of state aid means the actually claimed has to be much less, permitting a more ambitious plan for FTTP and even planning more FOX per county.
Posted by Gadget over 3 years ago
@ValueforMoney - so what are you proposing for situations where the revenue does not cover opex if only incremental capex is covered?
Posted by themanstan over 3 years ago
@VFM
Hadn't we agreed that the recoup'ed money (i.e. where factored costs were substantially) should be used drive the fibre infrastructure closer to those end users to far from cabinets.
This recoup'ed money is still not fully calculated as the invoices have to still come in and be finalised for any given project.
Posted by mpellatt over 3 years ago
But surely you would agree that this must be in the context of a contract that firstly ensures that all retail operators get transparent equality of access to the local infrastructure and backhaul, and secondly that if BT Openreach achieve broader commercial financial benefit from taxpayer susbsidy - or their calculations prove to be wrong - that this benefit is returned to the taxpayer.
Posted by ValueforMoney over 3 years ago
@gadget -BT MD is happy quoting on twitter economies of scale in 90% rollout. Let's put the opex numbers in the public domain so they can be discussed.
@themanstan, - but BT has re-positioned FTTP FOD as business only in effect discounting this option, and fibre to the Dp needs to be planned in advance of FTTC not after. The lack of transparency prevents efficient design.
Posted by AndrueC over 3 years ago
If BT is overcharging for its roll-out why didn't other providers undercut them and win the contract?
Posted by Somerset over 3 years ago
So after this a look at other government contracts?
Posted by ValueforMoney over 3 years ago
mpellatt 1) wholesale was a requirment, not an option, 2) equal access via passives is limited to being unworkable but that assumed BT match, ignore for now, 3)Broader commercial benefit is fine but this fails to take into account that BT has by its owb admission inflated its costs ie Project Management at 35% and assumed according to their spokesperson they would win only one bid.
Posted by PhilCoates over 3 years ago
@AndrueC

Which other providers? VM showed no interest, Fujitsu dropped out and as far as I am aware the BDUK process excluded providers with an annual turnover below a certain point. Again, at the time, I understand e.g. fixed wireless was also excluded. I am convinced in my own area that BDUK funding is being used to part fund the already planned commercial rollout by BT.
Posted by themanstan over 3 years ago
@VFM

ECI do have FTTC solutions for bringing the fibre path closer to end users.

This is what I would push Openreach to use.

http://www.ecitele.com/OurOffering/Products/Pages/MiniCab-64V.aspx
Posted by AndrueC over 3 years ago
@PhillCoates: Those are related issues. I think what I'm asking is: If BT are such a lousy choice someone else should've been able to do better. If not then BT is/was the best choice for the project.
Posted by ValueforMoney over 3 years ago
@AndrewC Communication Act 2003 points to BT's enduring monopoly particularly in rural areas.
Ofcom 2010 FLAM - the detail (Chp 6 & 7), not the propaganda bits states unlikely their will be demand for PIA. Even with PIA - investors need to see assets so PIA not the issue.
Annual turnover - still low considering any infratructure put in needs to be considered national infrastructure.
'Competition' had withdrawn or been worn out by the time BT agreed the Framework rates. BT admitted friday to the BBC they were costed assuming they would win only one bid.
Posted by ValueforMoney over 3 years ago
@AndrewC @PhilCoates BT only realistic choice so deal had to be done, which is separate from achieving value for money. The latter demands transparency or you risk sub optimal outcome.
Posted by ValueforMoney over 3 years ago
@Somerset your correct, 1/2 bn contingency is peanuts in defence contracting, but it would be a real shame if that is the standard we live by.
Posted by PhilCoates over 3 years ago
If only we could abandon HS2 and do fibre properly.

@AndrueC - agreed but its a moot point. BT were the only bidderes ergo they become the best choice by default.

As someone who lives in a 500m x 500m x 500m triangle 'not-spot' surrounded by planned fibre, the prospect of putting the whole shebang on hold is galling.
Posted by mervl over 3 years ago
The commercial roll-outs are OK. Elsewhere why can't communities organise their own solutions by raising money locally, commercial grants/loans and even National Lottery support? B4RN managed it in an area as hard as it gets to make commercial. The mess arrives with taxpayer funds when it all gets political. State aid to watch catch up tv, play on-line games, do speedtests and upload and download more data than they can ever use doesn't look to me like any sensible use of state aid at any price. We'd all like "sommat now for nowt". Doesn't mean we should get it though.
Posted by PhilCoates over 3 years ago
@mervl

But its not 'sommat now for nowt' is it? As a taxpayer, my (and presumably your) taxes have been used to support the project. I happen to think that HS2 and our military involvement in other countries is a huge waste of taxpayers money and significantly less beneficial that good communications infrastructure. In a democracy, we have to live with the decisions our elected representatives make. Additionally, I am not sure that the 15 people who live in my not-spot could ever come up with the funding required and I am damn sure use of lottery money would be frowned upon.
Posted by ian72 over 3 years ago
@PhilCoates even if they did cancel HS2 the likelihood is that something else would be higher priority than FTTP. Someone has created a business case for HS2 (political or financial) and so to get FTTP would need a better case than HS2 (and you would have to know what the magic words are to get that case through)
Posted by Somerset over 3 years ago
@mervl - community projects can work, eg. B4RN, where there are the right skills. But how many communities could run a technical project and support it for the next 20 years? eg. Selling.
Posted by New_Londoner over 3 years ago
@Somerset
Don't forget B4RN was subsidised too. You may remember all those helpful farmers using their tractors to dig trenches for ducting etc? How many £billions do UK farmers receive in subsidy from us each year through the Common Argicultural Policy?

People in less agricultural areas might struggle to get free use of the equipment to make a "community" solution viable.
Posted by New_Londoner over 3 years ago
Back on topic, pathetic that the PAC muppets want to delay a project that could benefit large numbers of us just to give them yet more media exposure, more opportunities for pointless grandstanding.

Their ability to profess outrage on any subject at a moment's notice is truly impressive, perhaps suggests Hollywood rather than Westminster is where some of them would prefer to use their meagre talents. It would be nice if once in a while our politicians remembered who pays their wages, that they are meant to be representing us poor voters and not just representing themselves.
Posted by Plankton1066 over 3 years ago
While we are in a situation where BT will not say where the BDUK rollout is going and who will get what speed, it cannot make sense just to give BT more subsidy. How can anyone bid for the funds to cover the final 10%, or what ever the figure is, when no one knows where this might be and has the shadow of BT who can just overbuild saying that it was always in their BDUK plan. Yes PAC aren't helping but BT obstifiction around the BDUK build isn't helping either.
Posted by David_OConnor over 3 years ago
The announcement is a provisional allocation of funds. Councils make an Expression of Interest by 25 March to secure the funds. Then submit a Funding Request by 30 June. Routes to get a supplier are to make a change control to existing contract, procure a regional framework or do a separate local procurement. Change control takes 3-4 months and procurement 4-6. PAC cannot stop anything happening unless they influence a decision maker to do so. In Lincolnshire we already have a state aided fixed wireless project as well as a BT contract using the BDUK framework.
Posted by fastman over 3 years ago
plankton the more rurla or supposedly rural you get rhe moire detialed planning work you have to do and also the more innovative you beoome - there is a village that was in last 10& of a of a bduk are and expected nothing - -- we found that fibre cable and copper cable go through their village so a new cab will be creasted they will be around 40 m/bps once work is done - technology is moving forward on these things cornwall is a prime example coverage percentages have increased as we are able to do more and push the fibre futher
Posted by mpellatt over 3 years ago
@fastman - exactly - with technology moving forward and plans changing, what isn't commercially viable this year may well be next year. It would be wrong to subsidise something from public funds and see the benefit going to a company's shareholders in short order.
Posted by ValueforMoney over 3 years ago
@New_Londoner Muppets at PAC? BT shareholders are at risk of not gaining access to £250m, because a small number of BT managers do not appear to understand State Aid.
PAC have noticed a big discrepancy between state aid paid in NI (excluding Belfast) and that identified in the NAO for BDUK programme.
BT shareholders do not need another BT Global debacle. With a £100m of inflated Project management charges identified and the BT spokesman said the Framework prices were set to win one bid (BBC last Friday), then this group of BT managers need calling to account.
Posted by Gadget over 3 years ago
May have been bid like that, but what has been invoiced.......in theory the councils should be able to see that easily and if the invoices do not stack up then quite rightly seek changes
Posted by WWWombat over 3 years ago
@mpellatt
You're right. If the government funded nothing whatsoever, then fibre broadband would have gradually - slowly - percolated further and further. It would perhaps cover the round-1 area in 5-8 years instead of 2-3.

The government is very clearly buying an acceleration here, so that the rural (ish) areas aren't left without yet again.
Posted by WWWombat over 3 years ago
@VFM

It is wise, smart, and sensible when bidding, to bid without assuming you win any other bids. *If* you do, then you can either gain additional profit, or go back to your partners and give them a price cut.

Which happened in practice? That's right. A price cut.

You are making a mountain out of a worm-cast here.
Posted by WWWombat over 3 years ago
And I agree with NL about the muppets at PAC.

They are in it for self-aggrandizement and to hear the sound of their own voices. When the rest of government considers them to be an embarrassment and a detriment to the UK, and is willing to go public about it, you are given a warning that perhaps not all is right there.

It appears that I am not the only one that doesn't trust a word they have to say, nor do I trust that they are working in the interests of the general public.
Posted by WWWombat over 3 years ago
@mervl
Other communities have been organising their own broadband coverage. But it is a small effort, happening in dribs & drabs.

Scale is one of the issues here... you need projects to come onstream for around 4,500,000 properties for BDUK-1, and another 1,500,000 for BDUK-2.

6m properties is the same as Greater London, Greater Manchester, and the West Midlands combined.

B4RN had a phase 1 target of 1500 premises, and has passed around 500 so far. You'd need 4,000 similar projects; are there that many Barry Fordes and Chris Conders around?
Posted by ValueforMoney over 3 years ago
@WWWombat It was a national framework based on state aid. BT did not go back, they were found out, having publicly stated in Parliament the framework reflected all the benefits of the commercial rollout. They also stated they gave significant concessions early in the process without providing any evidence. There is a factor of 3 times difference to be accounted for. This has barely started.
Posted by Gadget over 3 years ago
@VFM Whilst raising concerns and wishing to have those concerns answered doesn't it come back to a)do you/PAC think NI is an accurate representation of the rest of the UK not only for topology but also processes and b)have you seen all the submitted invoices/timesheets and subjected them to forensic auditing even taking into account that not a single project in the main BDUK framework has completed yet?
Posted by ValueforMoney over 3 years ago
@Gadget - NI subsidy(excluding G.Belfast) data we understand from BT presentation to PAC should only be c12.5% different.
Not interested in your timesheets, when BT promised same rates as commercial roll out. BT confirmed to analysts - £1.3bn of £2.5bn was capital for circa 50-55k cabs for 19m homes -£23k. NAO found av £47k subsidy. I am a shareholder I do not want another BT Global. None of your answers(blagging) is remotely reassuring. Thank God for PAC.
Posted by New_Londoner over 3 years ago
@VFM
The problem with PAC is that the members are horrendously ill-informed. For example it's Chair does not seem to understand such complex concepts as postcodes! Also it publishes reports littered with false assumptions which it uses to build its conclusions. The broadband report is just the latest in a long series of such examples.

Posted by New_Londoner over 3 years ago
Contd

I think the concept of the PAC is fine, the problem is that the current members are either unwilling or just incapable or carrying out its remit. It's the age-old problem of who polices the police - who audits the PAC and how do we replace it with a competent group of scrutinisers?

If the current group took as much care discharging their duties as they do writing press releases and making media appearances then we might end up with something rather more fit for purpose. What we have now at the PAC is fast becoming a national embarrassment.
Posted by chilting over 3 years ago
I can definitely see where the PAC is coming from but it seems hardly fair to inflict yet another delay to the BDUK roll out. The whole BDUK process has been far from transparent with the taxpayer having little idea on what the money is being spent on. As far as I can work out the BDUK funding is just being spent on suppling and laying the fibre with the cabinets funded by BT. I am sure that BT get a very similar income from a cabinet regardless of its location, once it is installed.
Posted by ValueforMoney over 3 years ago
@new_Londoner PAC may not understand BT's wholesales obligations, Ofcom's propaganda on competition and the reality of rural, but have a good deal of experience of the public sector being charged a £100 to change a lightbulb. Their concern here is the use of ERDF audits to establish value for money in the absence of any reference costs for the commercial roll out or independent verification of BT's own investment. The identification of c£100m (35%of 17%(NAO) of BDUK+BT funding) exccess PM charges is the tip of the iceberg.
Posted by New_Londoner over 3 years ago
@VFM
The problem as I see it is that the intervention by PAC is too late, ought to have been when the government was deciding on the structure of its procurement. This is a common problem with PAC "investigations".

So rather than Raising issues with a proposed procurement, they instead rail against suppliers that have had the termerity to bid and win government contracts, on terms set by or agreed with the government. All this achieves is deterring increasing numbers of possible suppliers from bidding, so probably pushes up costs to us taxpayers in the long run.
Posted by New_Londoner over 3 years ago
Contd

This is compounded by their endless media posturing, and the production of reports where any basis in fact is entirely coincidental. This is why they tend to make their pronouncements in places where Parliamentary Privilege applies.

By all means have competent scrutinisers holding the government to account, but that is not what we have with the current PAC arrangements.
Posted by ValueforMoney over 3 years ago
@New_Londoner Much postering by would be competitors, procurement specialits who have not read the communications act or BT's wholesale obligations; competition myths and commission aspirations, but this should not, however bad lead to a potential tripling of subsidies, should BT be capable of generating the bills. BT's definition of VFM is being decided by passing ERDF audits in Cornwall all behind confidentiality agreements. That's not much of an efficiency measure.
Posted by ValueforMoney over 3 years ago
@New_Londoner Do not get me wrong. It will still be a good job, but the UK will missed the opportunity to do more FTTP and BT will have missed the opportunity to request substantial new funding for transiition activity over whatever timescales BT Architects wish to work.
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