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INCA wants clawback to be put to competitive tender
Thursday 20 August 2015 11:44:36 by Andrew Ferguson

The Independent Networks Co-operative Association is calling for the money currently being handed back into the various BDUK projects to be shared out around alt-net providers via a competitive process. The money involved is from the gain share (clawback) mechanism that BT activated with the change of its take-up assumptions from 20% to 30% recently and amounted to £129m nationally.

"“INCA represents a wide range of alternative suppliers, and many are already making excellent progress delivering super and ultrafast broadband services in urban and rural areas. Increasingly, government and BDUK see these suppliers as forming an important part of the mix for maximising coverage and achieving the best possible value for money for local broadband schemes. More often than not, investment from altnets requires less public subsidy than Telcos, for example, 50% rather than 85%, and regularly requires no public funding at all. This is in part due to their local knowledge of the community and geography, as well as the fact that they can be far more flexible in their approach and commit private investment to areas that BT finds challenging.

In many of our towns, cities and rural areas, alternative suppliers including Gigaclear, Hyperoptic, ITS Technology, CityFibre and UK Broadband, are building new ultrafast and superfast networks with great success, creating the digital infrastructure necessary to help our businesses and economy thrive. Often they work in partnership with other providers and with community schemes, for example B4RN, Fibre GarDen and Cybermoor. It is unacceptable that many urban areas, in addition to the well-publicised rural notspots, still suffer from poor broadband. It is the alternative providers that are often willing to invest in digitally deprived areas when others would prefer to wait for a subsidy to materialise.

Malcolm Corbett, CEO of INCA

We can foresee one glaring problem and that the original BDUK contracts probably defined how the process would operate in terms of the claw back mechanism, so any changes now are likely to take time to administer and if lawyers become involved might actually waste a chunk of the money with consultations. Not all the phase 2 has gone to BT, so we will be able to assess how alt-net take-up compares to the BT projects eventually, for example what will the Relish (UK Broadband) fixed 4G LTE network in Swindon deliver.

Comments

Posted by TheEulerID about 1 year ago
The original BDUK framework statement allows for clawback money to be placed in a reinvestment fund. It does not, automatically, get used with the same supplier. However, there are surely a couple of other issues from that statement. Firstly, I would expect the normal EU state aid funding rules will apply and it's not obvious how this would benefit urban areas that were not eligible in the first place (unless the state aid rules have been changed).

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/378713/State_aid_-_Guidance_-_Clawback.pdf
Posted by themanstan about 1 year ago
Take a close look at:

3.3.1 and 3.3.3 (C)

These clauses indicate that the existing supplier should be used for using the funds.

It would be down to individual regional BDUK contracts which would specify any flexible spending options of the clawback.

Posted by themanstan about 1 year ago
Barnsley, Doncaster, Rotherham and Sheffield Combined Authority

BDUK contract, see 12.1, shows clearly this contract follows the strict BDUK clawback with only the successful bidder and the authority agreeing expenditure.

https://www.whatdotheyknow.com/request/252462/response/628692/attach/html/10/Redacted%20Schedule%205.1%20Milestone%20Payments%20BT%20Version.pdf.html
Posted by themanstan about 1 year ago
Hmm... bit too long that.

https://www.whatdotheyknow.com/request/bdukbt_contract_2

schedule 5.1 is the one you want
Posted by TheEulerID about 1 year ago
@themanstan

But the important bit is 3.3.5. If there is any unspent reinvestment money will remain at the end of the contract. Also, it does allow for money to be spent in new intervention areas (although they have to be separately qualified).

This rather begs a question. When is the contract considered closed?
Posted by TheEulerID about 1 year ago
Also, section 12.2 in that BDUK contract does allow for a non-zero balance to be returned to the authority at the end of the contract (albeit 12.1 seeks to achieve a zero balance). That does seem consistent with the framework agreement that there can be money left over after the term of the contract.
Posted by themanstan about 1 year ago
The funds have to be returned to the authority at the end of the contract, as the BDUK proportion would need to be returned back to BDUK to fulfill the state aid rules.
Posted by Blackmamba about 1 year ago
Theeulerid.
The end of the contract is 7 years after the Cab is open on the 20 % clawback money on each Cab the money is returned to SCC.
Posted by TheEulerID about 1 year ago
OK. If it's 7 years before the contract is closed and the returned money is then free to be reused as the local authority might wish, then that would certainly explain why BT would want to accelerate the clawback process. It means more coverage under the existing contract. I also rather suspect that there is more of this to come as I don't thinkg £129m is the end of it.
Posted by Blackmamba about 1 year ago
Hi TheEuler.
It is most inportant to get the customers changed over as soon as possible to keep the pressure on BTOpenreach to bring in new innovations (G/fast regerations and even to extend the fibre to the customers so to keep the investment in BT network even if it is not cost effective in the short term.
Posted by ValueforMoney about 1 year ago
@EulerID - The BDUK/BT plan supports 30,000 cabs/fibre paths to achive whatever cabs can achieve. With a little more scrutiny it will become clear that this costs less than a £1bn, with debates continuing on BT's contribution.
This leaves circa £700m subsidy + BT contribution including £129m, but no OR resource plan to take fibre into the d-side for in-fill.
Posted by ValueforMoney about 1 year ago
@EulerID - Gigaclear appears to be seeking subsidy of < £500 while BT has been raising invoices at close to £1,100 per premise connected where it has deployed FTTP clusters.
The excesses in the existing Framework may lead to a new state measure.
Posted by WWWombat about 1 year ago
@Euler, @Stan
Everything you are talking about assumes this is clawback. What if it isn't (just looks like it)?

BT say they have re-jigged their planning assumptions, and now assume 30% takeup. The result is that they have to invest £129m extra of their own money.

If the £129m extra is BT's own, none of that is going to INCA's altnets.

Obviously BT's own money frees up £129m of subsidy, making it available for further plans.

Where in the clauses is the text that deals with what to do with the money if BT chooses to invest extra, and can now go further than the original 90% target?
Posted by WWWombat about 1 year ago
@vfm
Gigaclear might be seeking less, but only at a limited number of locations where they can make those numbers work. Usually piggy-backed off something that makes the cost of backhaul cheap enough.
Posted by TheEulerID about 1 year ago
@WWW

An interesting point what this counts as. That BT have adopted a more optimistic commercial model than was in the original tender document is an effective reduction in the gap funding requirement in the original tender they made. However, the mechanism appears to be using the clawback machanism to put the money back into the reinvestment fund. As it seems the only mechanism to actually use that money before the end of the 7 year contract is by spending it with BT, it looks like a clever move. Unless it is to sit idle, it will be used to increase BT's infrastructure coverage.
Posted by TheEulerID about 1 year ago
nb. all this is a very long winded way of saying that I was wrong on my original assumption that the BDUK framework allowed the local project to decide where (and with whom) any clawback money can be spent. Unless that money is just left idle for the term of the contract, it will have to be spent with BT extending coverage in the original areas.
Posted by themanstan about 1 year ago
@WWWombat

Because any audit of the BDUK funding will show that the take up has been faster than projected and that clawback is due contractually. It's not in BTs interest to call it anything else, as they would still be liable for clawback if it wasn't.
The BT planning assumption re-jig simply means that projections for take-up within the contract period will reach 30% rather than 20%. This means the money for clawback is being released earlier. It has not changed the contract one iota.
Posted by Blackmamba about 1 year ago
Hi TheEulerID.
In Surry,s Contract BDUK the customers that do not receive the 15 meg target on Post Code service BT takes the hit in the clawback money what this does it encourages customers to take up the service even if the results are low under 15 meg on the Post Code. Win win for Surrey.s tax payers.
Posted by andrew (Favicon staff member) about 1 year ago
@blackmamba How does it encourage the customers?

Is someone going around to premises in Surrey telling people they MUST upgrade as it will cost BT more money because their line estimate is under 15 Mbps.
Posted by Blackmamba about 1 year ago
Hi Andrews Staff.
In Surrey the SCC only payed for 100 pair tie access so it was most inportant to get as many long lines on as possible, SCC (Katie did advertise all the Post Codes) to give all the ISP,s the opertunity to contact their customers and see if they could surport the 15 meg or give a service the customer was happy with under 15 meg. They were then able to complain via their local Counciler who should pick up the problem in OMR budget/system.
Posted by andrew (Favicon staff member) about 1 year ago
Strange as no isp has been pestering people around here then
Posted by Blackmamba about 1 year ago
Hi Andrews Staff
So it looks like the ISP,s are not interested in their customers in your area it could be they do not understand the contracts in this situation. I am refering to the Surrey area which may be differant to your area. The ISP is contracted to give the best service to its customers not Openreach.
Posted by andrew (Favicon staff member) about 1 year ago
I am referring to the Surrey area too
Posted by Blackmamba about 1 year ago
Hi Andrews Staff.
The area you are refering to was not advertised by Post Codes by Katie's department on the Surrey Web/page after 14 day delay for the email to reach the ISP,s on the enabled CAB,s.. The Cab,s you are refering to may have been in the commercial section so no action taken by SCC but the BT customers may have been told on their bills thus leaving it up to them to take action. Ewhurst web/page site did advertise Cabs that were open around it's area.
Posted by kijoma about 1 year ago
In Surrey they completely fail to recognise any other providers outside openreach already operating and providing in their area.

Regardless of how many times they are informed of this from customers of those providers and providers themselves.

I would envisage any clawback would end up back in openreach hands based on this?

Posted by Blackmamba about 1 year ago
Hi Kijoma.
At the meetings between Openreach and SCC all options had to been open to all providers and we (Hindhead Meeting )were unable to ask the customer who they were with so this made the whole scenario very comercialey sensitive. When the Cabs were open (Katie SCC ) on all faults and bad serviced provided did refer then back to their preferred ISP. I would have thought on the next phase in Surrey they will be looking at the service of all options that will be cost effective.
Posted by andrew (Favicon staff member) about 1 year ago
@blackmamba How do you know what part of Surrey I am referring to?
So cannot see how you can know if it was advertised or not.

Started off with you saying people are encouraged by provider to sign up if speeds are under 15 Mbps, but turns out you appeared to be just talking about the standard cabinet announcements and have mangled the words to make it sound like something more complex was happening.
Posted by Blackmamba about 1 year ago
Hi Andrewa Staff.
As I checked many Cabs for Avability over the 74 exchanges when they were open and rechecked them when Katie advertised the post code on their web/site she also readvertised many times 24/7 over the provision time. As the ratio of 1 to 5 on the Cab provision the chances are high so your area may have been covered. I still have a list of Cab,s that have not been converted yet to fibre access.i have rechecked them today plus the post codes that have fibre to the home tying in with your new checker data. (95% over 24 meg).
Posted by andrew (Favicon staff member) about 1 year ago
So what did you mean when you said "what this does it encourages customers to take up the service even if the results are low under 15 meg on the Post Code"

From what you have said, it sounds like nothing of the sort, but simply someone in the Surrey team doing the social media outreach, rather than a specific process encouraging people on slower FTTC lines to sign up.
Posted by WWWombat about 1 year ago
@stan
If BT changed their predictions to 30%, made extra funding of their own part, then clawback terms would change to match ... only kicking in after 30%. So it is in BT's interest.

Looking at the clawback guidelines, there are strict points at which to assess actual takeup - at 3, 5, 7, 9 and 10 years. The only opportunity to do this early, but still based on actual takeup, is if deployment finishes before 3 years.

There isn't really anything in the guidelines that fit with what has happened.
Posted by WWWombat about 1 year ago
@mamba
The coverage figure, whether it reaches 99.7% or not, is totally independent of capacity (so 100 tie pairs is not an issue) and totally independent of takeup (so encouraging subscribers is not an issue).

You need to rethink the logic behind your thinking.
Posted by WWWombat about 1 year ago
@stan
BTW, thanks for that link to the South Yorkshire details. Very interesting!
Posted by WWWombat about 1 year ago
@euler, @mamba
I think the contract length is meant to be 10 years - nominally 3 years of build, then 7 years once the build completes.
Posted by Blackmamba about 1 year ago
Hi Wombat.
The covage of 99.7% in Surrey is the total lines (450k lines in Surrey) covering above 15 meg down as quoted at the Dorking Meeting this ties in with the number in the councils minuites aprox 1400 lines not getting 15 meg. The Openreach representative confermed this when I spoke to him after the meeting so I have always kept to this base number. I think I did state the contract time was 7 years after the Cab is open. At the meeting they did not say that long line may be covered with fibre eg. Bowlehead green Elstead Puttenham fibre to the home so the % result is closing.
Posted by themanstan about 1 year ago
@WWWombat

The change in percentage relates to take up only and not clawback, that cannot be changed as it's fixed in the contract terms.
They previously expected 20% uptake by the end of the contract, so if take up was higher clawback would kick in.
But they now predict take up to be 30% by contract end. The 20% clawback threshold is unchanged hence the release of funds for reuse.
Posted by Blackmamba about 1 year ago
Hi Broadband Watchers.
At the last report Surrey was running at + 27% on the take up rate on the Cabs in Katie's contract and I feel BT/Openreach has been payed for the fibre as the Post Codes are open for service in the last few weeks covering long lines over a large area. See Thinkbroadband checker and coverage it even shows on the map section. In the OMR pot ?.
Posted by andrew (Favicon staff member) about 1 year ago
What is Katies contract? Do you mean the Surrey BDUK contract as a whole, or some sub section that someone in SCC is overseeing?
Posted by WWWombat about 1 year ago
@stan
Of course a contract can be changed ... that's why they have a change control process.

Even if they didn't have a process, a contract is really only a written statement of agreement. If everyone chooses a new agreement, on top, especially if it is a win-win, the two parties can amend the contract anyway.

Even better ... all these details would be in the attached schedules which are designed to be changed anyway.
Posted by Blackmamba about 1 year ago
Hi Andrews Staff.
Sorry I missed your reply. As you can see from Ewhurst Web/page that many Exchanges see list have been opened up to FTTH in the last few weeks with fibre on demand. The OMR pot could be depleted from this work on the long lines that have FTTC/P. SCC office is working with Katies and Openreach on the low speed,s under 15 meg that have been report by letter. This I feel will be in the OMR contract in the comming weeks. See checker results Wormley area.
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