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Cashback for the Government as superfast take-up increases
Thursday 30 July 2015 10:08:35 by Andrew Ferguson

The clawback news in the BT financial results and a statement from DCMS over some the reinvestment of some £129m to extend the reach of superfast broadband might mean that a broadband levy might be put back on the shelf, especially if take-up of fibre based services continues over the next few years.

"The Government welcomes BT’s news today that the company will make up to £129m available to extend the Government led roll-out of superfast broadband.

The funding will be made available to local authorities to reinvest the money in providing further superfast broadband coverage to even more homes and businesses and much earlier than originally planned.

The money is being made available as a result of a clause in the contracts BT agreed with governments and local authorities that allows the funding BT has received to be returned or reinvested into further coverage if take-up is better than the 20 per cent* expected in BT’s original business case. The high take up rate to date has resulted in BT making a new business case assumption of reaching 30 per cent take-up in these areas."

Part of DCMS statement

We don't think that the £129m will actually change hands in a nice attaché case, but we believe this means that gap funding already invoiced and paid to BT that now is payable back will be held onto by BT for re-investment in the continuing phase 1 and phase 2 projects. The amount will vary from project to project as each local authority area has an individual contract and one hopes that the local authority will have some input on where this will be invested, but as we have found some projects work closely with BT and others seem to have no input at all.

"BT will work with local bodies over the coming months to identify where these funds can be provided early to enable the local bodies to invest in increased fibre coverage sooner than would previously have been the case."

Gavin Patterson, CEO of BT

It will be interesting to see how far further claw back sums will help to push the 95% superfast broadband coverage, the current funding in theory should see 95% coverage by the end of 2017. In areas like Northern Ireland already, onesie style cabinets are appearing in areas that were too far from their existing VDSL2 cabinet to benefit smaller clusters and in some parts of the UK FTTP is available to those who are on long VDSL2 lines and not getting superfast speeds. Another option might be to not increase the coverage footprint, but a project to opt for a higher proportion of native FTTP in its phase 2 roll-out.


Posted by csimon about 1 year ago
Quick question - are there any figures for the take-up in non-BDUK aresa, i.e. the commercial rollout? And what is meant by "take-up" - the percentage of people able to order fibre-based services who have done so regardless of whether they already had an internet service, the number of people who have done so when compared with the total subscribers in the area (i.e. including those unable to get fibre), or those who have converted from ADSL, or some other metric?
Posted by WWWombat about 1 year ago
The overall takeup is 20%, as reported a couple of stories earlier.

The rate is, essentially, number of fibre-based subscribers, divided by number of homes who could order a fibre-based connection (ie those connected to upgraded cabinets), converted to a percentage. The second number is usually labeled "homes passed", but there is a very small fraction who are too far from an upgraded cabinet to order - around 2%.
Posted by WWWombat about 1 year ago
It isn't clear whether that 2% are included or excluded from the calculation, but they'd only have a small impact on the final 20% figure.

ADSL subscribers, or the proportion of old/new subscribers, have no effect on the calculations.
Posted by WWWombat about 1 year ago
I've been thinking about the language used on this issue, as it isn't entirely clear.

It reads to me that ...
- the current takeup rates have persuaded BT (with BDUK help, presumably) to redo their calculations on viability, and change the 20% to 30%.

- With this change, BT will then contribute £129m to the 44 projects (£3m each!) as an extra portion of their own contributions.

- This frees up £129m of subsidy to apply deeper in the BT network.
Posted by WWWombat about 1 year ago

- As such, this isn't exactly clawback as we know it

- Clawback will now start at 30% takeup.

As we were expecting £500m of subsidy to extend coverage from 90% to 95%, this lump may be worth an extra 1% - 1.5% of coverage.
Posted by ian72 about 1 year ago
We are reading 2 different things I think. I believe it says that BT would now assume 30% for the business case - ie cabs that were not previously viable at an assumed 20% take-up may be viable at a 30% take-up level and so could now go ahead.
Posted by themanstan about 1 year ago
Agree with Ian72, BT now expects BDUK cabs to have a 30% uptake level within the agreed timeframe. Which actually relates to more clawback being expected, so there will be more than the £129m to date.
Which, hand in hand with the lower capital costs that BT has been invoicing BDUK with, should result in more funds all round for higher penetration. So possibly another £100M for clawback + £90Mish for lower capital costs would result in ~£300M total.
Posted by Blackmamba about 1 year ago
Hi Broadband Watchers.
To date I would think the clawback is running at 35%+ on BDUK contracts due to 5 to 1 ratio on Cab,s. in most cases the BDUK cabs would be servicing lines further from the Exchange thus the better take up rate % due to long lines and slow speed/service.
Posted by ValueforMoney about 1 year ago
It is good some this emerge. It is too much for clawback on take up, so it will include some of the capital promised.

I hope it represents the following, to July the porject has probably passed 3m and 15,000 cabinets. This £129m would represent £43 per premised passed or £
Posted by ValueforMoney about 1 year ago
or the first £8,500 per cabinet installed.
I think this is not unrelated to the new state aid measure which now overdue a month.
Either way like the second NAO report on excess costs this capital contribution should be seen against a total for the project of the £353m we should be seeing.
Posted by gerarda about 1 year ago
It would be pretty shocking if there was no provision for the clawback to be returned by BT so that it could be used for a non-FTTC solution if necessary.
Posted by fastman about 1 year ago
Gerada my understanding is the clawback money can only be spent on NGA technology so FTTC / FTTP or FTTRN

Posted by ValueforMoney about 1 year ago
@Fastman or no solution at all, which is why I could not understand the bar being set so low with no immediate means to extend.
Posted by gerarda about 1 year ago
@fastman even if that means notspots remain?
Posted by Blackmamba about 1 year ago
Hi Broadband Watchers.
My understand of the clawback money is that it can be used on either the OMR new contract which is overviewed by procurement or returned to the CC coffers.
Posted by WWWombat about 1 year ago
AIUI, clawback gets notionally returned to LA, for them to choose what to do with it ... which may be to extend BT's coverage, or fund another contract with someone else, or not spent at all and sent back to LA or central government.

The emphasis that this reports - that BT pretty much gets to work with the funds unquestioned - is what makes me think this isn't clawback as we understand it.

And, no, @vfm - I don't think it is a sign of previously promised capital. I think it is new. And still won't be visible in the accounts for you.
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