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£1.1 million of clawback improve superfast coverage in North Lincolnshire
Thursday 13 August 2015 12:31:58 by Andrew Ferguson

Planning is underway for the phase 2 roll-out of superfast broadband in North Lincolnshire after the phase 1 target of 92.5% superfast was announced as complete in June 2015. While phase 2 is not delivering yet, the coverage has grown a little more and this is most likely due to a few cabinets going live just after the official announcement and on-going tracking of what has changed for exchange only line areas.

Progress of superfast broadband roll-out in North Lincolnshire

The phase 2 contract now comprises some £4 million of funding, £1.1m is re-investment due to the gain share (claw back) process that BT kick started early, another £0.9m of new BT investment, £1m in savings from phase 1 due to the target being met under budget and finally £1.18m from central Government. It is expected to deliver improvements to another 4,000 premises which we estimate to be around another 2.5% of North Lincolnshire premises.

thinkbroadband calculation of Superfast, USC and Fibre Broadband Coverage across North Lincolnshire
- figures as of 12th August 2015
Area % fibre based % superfast
24 Mbps or faster
% superfast
30 Mbps or faster
(change since 18/06)
% cable % Openreach FTTP % Under 2 Mbps USC % Under 15 Mbps
Combined Project Total 93.8% 90.3% 89.6% (+0.2) 64.5% 0% 1% 6.7%
North East Lincolnshire 95.3% 94.2% 94.1% (+0.4) 89.1% 0% 0.5% 4%
North Lincolnshire 92.3% 86.5% 85.2% (=) 40.2% 0% 1.5% 9.1%

The change is fairly minor but at 24 Mbps or faster the project is past the Governments 90% target, additionally if the Lightning roll-out from Virgin Media delivers extensively during the phase 2 period we will see the extra 2.5% from BDUK phase 2 and mostly overlap from Virgin Media but so crucial urban gaps may be filled.


Posted by ValueforMoney about 1 year ago
The original public subsidy was £5.25m for phase 1, and your reporting £1m under budget and BT 'gain share' of £1.1m.
So the actual cost for phase 1 is about half the public subsidy in the original contract.
And the £1.1m cannot be based on an extra 10% take up, but a partial capital contribution against the £3.3m promised.
Posted by andrew (Favicon staff member) about 1 year ago
If the figures and what they are called are wrong take it up with BT and North Lincolnshire who provided the broken out figures.

Interested to know how you can prove the £1.1m is not based on the change in the commercial case from 20% to 30%.
Posted by ValueforMoney about 1 year ago
@Andrew Average cabinet passes, 200 premises, 20% to 30% take-up is an extra 20 customers paying a wholesale price of £7 a month, or £1,680 before costs pa.
That would not trigger what looks to be an initial capital contribution of £8,000 per cabinet installed to date.
It gets more strange if you go to 50% take up and BT need to install another cabinet at its own cost.
Posted by ValueforMoney about 1 year ago
If you look at the BT statement in its accounts, there is nothing to suggest they have contributed anything to the BDUK costs thus far.
This is likely to be a correction so that the new state aid measure might be approved by the EU. Other corrections will be needed.
Posted by andrew (Favicon staff member) about 1 year ago
So are you saying categorically proven (or just guess work) that BT has spent zero money on delivering ANY of the FTTC/FTTP work in the BDUK areas?

Given some projects have finished phase 1 that is a strong accusation and if true surprised an EU court case is not already running on it.
Posted by ValueforMoney about 1 year ago
@Andrew This is the fist time apart from press releases that any capital contribution has been referenced in BT's published accounts.
Given the NAO evidence on total avaerage costs, then the evidence is pointing towards that conclusion. Claw-back on its own of an additional 20 customers per cabinet would not explain the sums involved.
Until the current review, the matter is a devolved affair.
Posted by chefbyte about 1 year ago
Just hope they return to Grimsby and install it on the missing dabs in the town centre this time
Posted by chefbyte about 1 year ago
Cabs, even
Posted by TheEulerID about 1 year ago
@VFM has been flying this particular kite almost since the start of BDUK. He has no way of proving his conjecture as BT simply don't provide a nice neat beakdown of their capital expenditure against BDUK projects (but they report the money granted of course). Also, BT's contribution was never just capital - it was current account over the 7 year contact period anyway.
In that BT have gained from BDUK, it's undoubtedly OR's in strategic placement in the market and that they were able to offload much of the investment risk (witness the revised take-up assumptions).
Posted by ValueforMoney about 1 year ago
@EulerID - The NAO work on costs does provide evidence of total average cost and this is also stated in Oxero (redacted) but the run for 90% is less than half BT claimed for commercial £3bn/50k cabinets.
The state aid gap funding demands approximately 1/3 capital contribution. NAO I identified £353m capital from the contracts. So £129m of this has appeared by jigging some variable, while all counties are reporting underspend from the excess modelled costs or bad budgetting....
Posted by ValueforMoney about 1 year ago
@EulerID the good news is that the truth about the costs is emerging, although the precise nature of BT's contribution is yet to be established. The much much lower costs than portrayed by BT Group does mean we have fewer excuses is not addresses gaps in delivery in urban areas and SME's.
Posted by mklinger about 1 year ago
Perhaps they could use the extra money to do the job properly in some places, Wootton has 22 houses not connected because they're on an exchange line. They are between 70-500 metres from the cabinet ! and on the same line to the exchange. I find it difficult to believe it would take much to coneect them to the cabinet instead of the exchange. We have 2 houses next to each other , one can get fibre and the other can't. How ridiculus is that.
Posted by ValueforMoney about 1 year ago
@mklinger the public money exists, although it has taken sometime to get how cheap in the public domain, but there is contention on BT resource.
Budgets were set high, delivery thresholds low so you need to force your way onto a queue.
Posted by MCM999 about 1 year ago
@mklinger There are many tens of thousands of properties on EO lines and the cost of the necessary network arrangement to connect them instead to a cab is significant. At least many BDUK programs are prepared to pay for this work whereas those in urban areas where there is currently no BDUK funding have little prospect of the necessary work being done in the foreseeable future. Developments on brownfield sites built in the 80s and 90s are particularly badly affected.
Posted by jumpmum about 1 year ago
All the manpower required to get the cabs working will also be 'capitalised' so will come under the capital spend within BT. VFM only seems to include the equipment costs in his account. In my experience these are only around 1/3rd of the total costs.
Posted by ValueforMoney about 1 year ago
@jumpmun - all of BT's labour costs are capitalised and all of these are included in the estimates I quote from the NAO studies.
The EOL do need more work but are included in the averages prepared by the NAO.
Posted by WWWombat about 1 year ago
The NAO also explain that the current averages only really take account of the easier, cheaper work. They expect the averages to go up as harder cabinets come to the fore ... such as the ones requiring copper re-arrangement.

EO lines are one example of this - either by the creation of a new PCP to be paired with an FTTC node, or for some of the EO lines to be re-parented to an existing cabinet.
Posted by andrew (Favicon staff member) about 1 year ago
Did the NAO report actually investigate every cabinet delivered by the BDUK projects or a sample of them? Do we know which ones? At the time of the report there was very little EO activity at all.

There must have been a lot of detail I managed to miss from the NAO report, since I do not recall as much detail as some seem to be able pull from it/
Posted by ValueforMoney about 1 year ago
@WWWombat @Anrew 12,500 cabinets, fibre paths and spines to server to that point. The averages included then 65 cabinets in H&I, all those done in Suffolf which has a very high average.
It included planning and spine costs which occur early in the process.
I suspect the homogenity of the network breaks down at c90%.
Early EOL costings were less than cabinet costs BT relield upon in its evidence to PAC (£29k for the cab + tie cables+planning+pmo.)
Is it still your professional opinion a cabinet/fibre path costs £3bn/50,000 commercial cabs =£60k?
Posted by ValueforMoney about 1 year ago
@WWWombat the second lot work by BDUK in atypical Suffolk with an incomplete set of cabinets sharing an expensive spine came at a not too disimilar cost to that identified by the NAO.
Both the clawback and the underspends arising from the bad bugdets is just the begining. All the USC premiums need recyling and their will be additional work to clawback monies spent overbuilding Virgin. It is good news for rurak users and BT Openreach.
Posted by andrew (Favicon staff member) about 1 year ago
On the BDUK yes PAC/NAO very little actual data to help anyone verify what they say other than "BDUK calculated the average cost per cabinet as at
September 2014 at £21,100, which is markedly lower than the average bid cost per cabinet of
£28,900 calculated in July 2013" which appendix says was based on 18 English local body bids - nothing about 12,500 cabinets or confirming if fibre path, head-end, power etc are in the figures.
Posted by andrew (Favicon staff member) about 1 year ago
On commercial 100,000 FTTP at say £600 each, £60 million and 55,000 cabs at £26 each is £1.5 billion. Add in R&D, early roll-out costs of training, the areas where FTTP started but never got finished and is still to be completed and commercial cabs still waiting, and things, oh and the minor thing of creating 1000+ fibre head-ends and £2billion+ looks good enough.

The urban headends are often getting used for BDUK cabs, hence the urban start rather than most rural first direction.
Posted by AndyCZ about 1 year ago
VFM - Please explain how outsourced labour can be capitalised.
Posted by Gadget about 1 year ago
The headend is the point of handover to the ISP network, so any ISP has to provide their own backhaul from the headend to their own network - another reason to have headends remote in far-flung exchanges
Posted by WWWombat about 1 year ago
How many head-ends included?

I still think you're spinning a yarn on USC premiums. And naively optimistic if you expect refunds for over-building VM.

Wasn't the "worst" case of VM overbuild considered to be Rugeley? Which was investigated by all concerned, and found to be perfectly acceptable.

Counties now write into their OMR consultations that a postcode with 90% VM can be considered NGA-white. Some counties consider one single non-VM property in a postcode to be enough to turn it white.
Posted by WWWombat about 1 year ago
"Capitalised labour" is just a choice of where you put the numbers in your end-of-year accounts.

It doesn't matter whether the labour was in- or out-sourced. Just whether they spent their efforts on capital-based projects.
Posted by andrew (Favicon staff member) about 1 year ago
Will be interesting to see the same analysis efforts extended to the various winners of phase 2 contracts.

Coverage wise just waiting for the phase 1 goal to hit, so that alt-net efforts don't get used in the BT back slapping.
Posted by ValueforMoney about 1 year ago
@WWWombat - USC premiums at about 5% needs to be 'surrendered' and used constructively.
You point on overbuild is probably correct but 90% or a single premise in a post code needs to be challenged.
On heads ends, the number new ones needed, there were 800 installed and you will end up with 1200 perhaps.
Posted by ValueforMoney about 1 year ago
@Andrew, the engineering effort to install 200 cabinets a week should be applauded. The applause might be higher still, if the costs and contributions were understood, and if the resource was there to spend the money available on in-fill. Every county will report underspend (not effciencies) and there is much much more to come.
Posted by ValueforMoney about 1 year ago
@Andrew, you have got from £3bn to £2bn by using a more rural average cost. You should insert a sub £20k cost per cabinet.
The Ofcom Cartesian analysis on cost allocations may help help you to lower.
Even if we use £2bn, the state is paying £1.7bn, so the issue is worthy of more analysis.
Gavin P has used 50,000 cabs, do you have source for 55,000. I would hope 55,000 is true!
Posted by ValueforMoney about 1 year ago
@WWWombat I was seeking a reference to permission to overbuild Virginmedia at 90%. Do you have a public reference?
Posted by ValueforMoney about 1 year ago
@WWWombat - USC is I think 5% of the £1.2bn if every LA and DA contracted for USC about £60m. Several counties make reference to it.
Posted by ValueforMoney about 1 year ago
@WWWombat - Rudgeley, from memeory not referenced by Oxera, how many cabinets?
Posted by WWWombat about 1 year ago
Agree that USC budget needs to be surrendered where unused; no freebies. The premium adjective is the wrong bit.

IMO, 90% VM value should be investigated, as it is too low. Even a single property should be enough to qualify the area, and I'd believe that whoever won the LA contract, and whoever was being overbuild.

Of course, value for money tests still need to apply, so multiple properties are going to have to be this way.
Posted by WWWombat about 1 year ago
Haven't calculated total USC budget. I know NYorks started at £5m out of £26m. Once they added their mini-phase 2, some £2m got moved into NGA coverage, probably resulting in the budget changing to £3m out of £34m.

It wouldn't surprise me to see a further budget shift for the full phase 2 plans.

So, yeah, whatever gets left unused should be surrendered, once the LA has decided it can't be repurposed to any extra NGA coverage.
Posted by WWWombat about 1 year ago
References to 90% VM overbuild...
Usually found in (some of) the LA state aid public consultation document for phase 2.

Look at Worcestershire for an example, though they have an added note that overrides this to allow white classification for a single property.

Also visible in the phase 3 pilot documents on the dcms gov.UK site. There you can see differences between projects.
Posted by WWWombat about 1 year ago
Rugeley definitely mentioned in Oxera.

31 cabinets upgraded through BDUK, 1 cabinet left out, 1 cabinet still to be done (looks like it is for EO lines)
Posted by WWWombat about 1 year ago
On the VM overbuild issue...

It'd be interesting to know whether Virgin declared any Project Lightning plans to the LAs, to prevent any overbuild of their new locations.
Posted by ValueforMoney about 1 year ago
WWWombat - thank you, much obliged, will look at Worcestershire.
Virgin mapping not up to scratch. While providing the bureaucratic excuse, this does not help the circa 30 or 15 rural villages that could have benefitted from these funds, should some care be taken. It is not as if this increases the NGA premises passed number.
Lightning being planned now, overbuilding public subsidised rollout in some cases, but gap funding should reduce most of the problem.
Posted by ValueforMoney about 1 year ago
@WWWombat from Worchester Phase 'Note 2: Depending upon the nature of the data provided for the postcode by a supplier, postcodes may be mapped with an NGA 'white' classification if just 1 premises in the postcode does not have an NGA >=15Mbps service, even if many other premises in the postcode do have an NGA >=15Mbps service.' BT state aid lawyers must have puzzled over the legality of this.
Posted by ValueforMoney about 1 year ago
@wwwombat and note 3 same doc gives carte blanche to amend commercial footprint and claim subsidy. This is a strange form of serving a rural population.
This is not new, but the explicity written guidance I had not seen before. Thank you.
Posted by WWWombat about 1 year ago
A lot of the SEP consultations have wording similar to note 3 - allowing for these "conditional white" areas to be sucked in automatically. It's the right thing to do for those people, but of course you need to be sure that removal from commercial plan isn't taking the P.

Note 1 for WCC is the opposite of statements in other LAs; other LA's assume that the partial coverage of 2 providers overlap as much as possible; resulting in the biggest possible white area; WCC's note makes the white area into the smallest possible.
Posted by ValueforMoney about 1 year ago
@wwwombat I know enough BT lawyers to know they will be concerned by this.
I would assume if push came to shove, say the £15-£20k which BT was willing to invest commerially could re-emerge in another tweak to the BT model to block a complaint wasting everyones time. I know some would sacrifice their mother for this but sensible voices should prevail on this matter.
It's the bullying I do not understand. Bullying LA is expensive to orchestrate and counter productive.
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