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£150m declared as underspend by BDUK process
Friday 17 June 2016 11:12:05 by Andrew Ferguson

Deciphering fact from well meaning myths and plain old untruths is a big part of any Government contract and the media coverage surrounding it, and this applies even more so to the gain share money coming back out of the current BDUK projects and also the latest announcement of £150m of underspend being available from the processes central funding.

The £150m underspend was announced by Chris Townsend CEO of BDUK while talking at the Connected Britain conference and is in addition to the £258m that has been released via the gain share (claw back) mechanism so far. None of this is new money but rather the £150m is the result of BT producing smaller invoices and so was never in the BT bank account.

Some of the gain share has already been accounted for by the wave of announcements on extension work since summer 2015. How the £150m will be spent is a big unknown and it may result in the paths between Westminster and Local Authorities diverging with some keen to extend existing contracts where possible and others wanting totally new procurement and a focus on non BT based solutions. Another complication is that some councils may be keen to see if the money can be unlocked and removed from any broadband investment to assist in balancing council budgets elsewhere, the 7 year nature of the BDUK contracts may interfere with this desire though.

Hopefully the BDUK programme is not the first Government intervention project where money is being underspent but it does seem a very rare thing and for all the faults it should be applauded for delivering what it has and is it fair to say it is under budget?

The question of whether the BDUK project was a waste of time and resources is a common one and at the simplest level what the project has done is force the hand of BT to deploy faster broadband to a much larger area of the UK than would otherwise have happened by now. Crucially for those who feel BT is too dominant by concentrating their engineering teams on the BDUK roll-out for a couple of years this gave competitors an opportunity to build their own networks in the most commercial areas, alas apart from the rapid growth of Hyperoptic who are the second largest FTTH/FTTB UK operator, CityFibre while generating lots of positive Gigabit press and share pricing has yet to make an impact outside the metro network and business sector. With the new Openreach CEO (and changes started by previous incumbents) there is more of an ultrafast focus and thus this easy period looks to be ending, particularly given that Virgin Media Project Lightning is starting to deliver in volume too.

Back to the £150m its too early to say how it will be spent with and what it will deliver technology wise, but it makes the likelihood of the UK hitting 97% superfast broadband coverage more certain.


Posted by MobiusPizza 10 months ago
Yet here I am stuck in a new build in the developed area of Coventry with access to 3.5Mbps broadband due the new cabinet built to serve the new estate is not enabled for FTTC. The money they save doing that versus the expense of having to come back after 2020 to upgrade it is a typical example of corporate shortsightedness.
Posted by gt94sss2 10 months ago
If its a new build than Openreach would have installed whatever the developer requested. As such, you need to blame them for the lack of FTTC/P not Openreach.

Sounds like the builders only asked for voice connections..
Posted by mollcons 10 months ago
One block of 50 properties on my exchange (Great Mollington) currently only get a maximum of 2Mbps - the exchange itself only has 550 lines!
The rest of the exchange has been upgraded to FTTC using 3 cabinets allowing most but not all of the properties to get speeds between 5 and 38Mbps, leaving another block of about 40 properties on up to 8Mbps being exchange only lines.

This would be an ideal exchange to receive some of this additional funding to allow those who currently get below the proposed 10Mbps to improve their service.
Posted by New_Londoner 10 months ago
Given it's new build, what did your developer tell you would be available before you signed your contract? As @gt94sss2 says, the developer decides what to provide at their site so buyers need to ask questions if broadband is important to them.

If they haven't delivered what they promised then you should sue - of course if you didn't ask then buyer beware!
Posted by leexgx 10 months ago
most developer don't state what you be getting unless you ask
most don't and broadband is norm last thing on there mind until they find they can only get ADSL at under 1mb/s which is barely useable nowadays

it be my first ask before considering the house at all, FTTP should be standard for any future new estates builds now (as if they are going to the trouble of pulling the copper to the houses FTTP is not that much more) or at least have Virgin and BT so to force bt to enable the local cab to have FTTC or have no customers
Posted by fastman 10 months ago
Posted by MobiusPizza 2 days ago so whats your exchange and cab is exchange binley ?
Posted by fastman 10 months ago
FTTP is not much more if done prior to Build that assumes the developer asked for fibre either than voice service -- those developer post Feb 2016 (occupancy early 2017) will likely to benefit from new requirements - those build not more likely not to be
Posted by ValueforMoney 10 months ago
The addition of c20,000 VDSL cabinets should be welcomed.
Proof that it is cheaper that considered possible in 2009 BSG should be welcomed.
That much or most of Phase 1 will be repaid should be welcomed.
The quality and depth of work done in rural areas is a work in progress and will continue to 2020 if the funds are kept in place.
Posted by themanstan 10 months ago
It's not unexpected... the fact that BT could aggregate capital equipment purchases across all the tenders would make it cheaper...
Posted by ValueforMoney 10 months ago
@themanstan, will those 30%-40% too far from a rural cab have to endure poor service, or will the resource be found to do the in-fill? Much can be done given the money re-appearing.
Posted by fastman 10 months ago
VFM ? That much or most of Phase 1 will be repaid Really !!!!!
Posted by MobiusPizza 10 months ago

I asked, the sales person brushed it off as don't know. I wouldn't be able to find out either because the nearby postcode all indicate FTTC is enabled. I guess I could have pushed harder for answer but then again there weren't other properties available in the area that suited me.

On the other hand, I heard there is now push from Openreach for fibre installations on new developments.
Posted by MobiusPizza 10 months ago

There is push also from Home Builders Federation
Posted by themanstan 10 months ago

That's the limitations of a tender process...
Posted by fastman 10 months ago
that will only be for new sites that are live at present
Posted by ValueforMoney 10 months ago
@Fastman - £700m state aid received - £285m clawback and climbing, BT capital to be inserted as projects come towards the end. So yes..most. Rutland should be the first phase 1 to pay all of the initial subsidy back.
So why not more FTTP clusters beyond the cabs? This is not about the contract but about a willingness to do the work.
Posted by ValueforMoney 10 months ago
@Fastman - is the BT plan to hand back the money or plan to do more work?
Andrews analysis does show a lot of urban in-fill so it should not be a surprise if the money is paid back so more challenging geographies can be done. That is also something that should be saluted.
Posted by chilting 10 months ago
I guess BT will be putting most of their resources into G-Fast. Even with a subsidy FTTP to rural areas wont be a priority. capital returns on G-fast will be far more attractive.
To give the maximum number of the final 5% decent broadband fixed wireless has to be a far better option for BDUK to spend the £150 million on.
Posted by andrew (Favicon staff member) 10 months ago
@valueformoney Which of my analysis is "does show a lot of urban in-fill"?

Reinvestment of gainshare is not automatic, i.e. BT under contract cannot just go ahead and keep building, agreement with local authorities needs to be reached. A LA may decide to not spend it and eventually get their share of the money back into their bank account.
Posted by fastman 10 months ago
Rutland should be the first phase 1 to pay all of the initial subsidy back. -- not sure quite how you work out your numbers or that view
Posted by ValueforMoney 10 months ago
@Andrew - your blog on progress shows the gradual progress and in-fill on various geo-types. You can also read the various LA submissions to CMS Select Committee, Shropshire, Devon Sommerset.
Well North Yorks have extended reach continually, and you can improve the quality of a solution within a postcode.
Posted by ValueforMoney 10 months ago
@Fastman for your to ritually slaughter here are 16 lines
Rutland Phase 1 Premises 9,400
La Funding £1,380,000
BDUK £820,000
Total Public Funding £2,200,000
BT funding £800,000
Total Funding pot £3,000,000
Est BT structures (200 prems) 47
Est BT structures (150 prems) 63
Indicative cost £18,000 per structure
Outurn estimate (CMS) £26,000 per structure, Project Low Cost £1,222,000
Project High Cost £1,629,333
Clawback on 9.4kout of 3.9m for £129m £310,923
clawback total using £258m £621,846
Posted by ValueforMoney 10 months ago
@Fastman with £800k of BT investment in allowable costs and clawback on >50% take up no subsidy appears needed for Phase 1. I think the low cost of £1.2m was confirmed earlier for Phase 1
Congrats - it is fantastic news for the UK.
Posted by ValueforMoney 10 months ago
@Fastman the input numbers are the numbers in the public domain and used by BT in their press releases and in evidence to various select committees. The output appears, it may be wrong but I am sure you can enlighten us further.
Posted by ValueforMoney 10 months ago
Andrew - I know this stuff bores you but Rutland is tiny so you can quickly do a more complete job.
Posted by themanstan 10 months ago
@VFM you're ignoring all the other allowable costs as usual...
Posted by ValueforMoney 10 months ago
@FASTMAN - not good enough, you need to start listing them please.
Posted by TheEulerID 10 months ago

What you put up is wholly irrelevant. The milestone payment system against submitted receipts, the clawback system and so one are all covered by contract and audited. Without access to the full list of invoiced costs you can only work with speculative averages.

I would agree that it would be very valuable to know what remained in the reinvestment funds and more should be published, but in the meantime this just looks like speculation.
Posted by ValueforMoney 10 months ago
EularID it is not irrelevant to pose the question as to whether BT is ready for significant FTTP in-fill in rural or whether it intends returning phase 1 spends. The money is emerging and it will continue to flow back in the vast majority of projects.
Posted by andrew (Favicon staff member) 10 months ago
And as I've said before the rules mean the LA's have input on what BT does or whether they chose another provider...

As for me spending time working on Rutland, do you have the data on what was delivered in terms of work, ducting, power costs, labour time?
Posted by ValueforMoney 10 months ago
Input can be tricky, if the costs and capital are gamed.

No I only have access to the public data which is reflected above. It suggests with a very large margin for error that all Phase 1 funds can be returned or re-invested.
Posted by andrew (Favicon staff member) 10 months ago
In time it may be that phase 1 money all gets recycled, that was always a part of the contracts, so not sure why you bleat on about it so much.
Posted by ValueforMoney 10 months ago
@Andrew If you accept the possibility (lower costs, higher demand), it would be logical to look for evidence of delivering, or ambition to deliver FTTP in-fill at a reasonable scale in rural.
There is little evidence of a plan. This is worth commenting on.
Posted by andrew (Favicon staff member) 10 months ago
You are aware that FTTP is already proportionally already more available in rural areas or were you not, and the work we do tracking the roll-outs. Just with no access to Openreach accounts any cost analysis becomes a speculative exercise.

I guess Wales saying 4% FTTP was planned last summer is no evidence of a plan too. Or the infill work going on in Northern Ireland.
Posted by fastman 10 months ago
VFM -- @FASTMAN - not good enough, you need to start listing them please -- pardon !!!!
Posted by ValueforMoney 10 months ago
@Andrew it is indeed progress and needs to be saluted, and it is symbolic of what is possible?
Posted by ValueforMoney 10 months ago
@Fastman -your free to begin listing 'other costs' not yet referred to in the NAO evidence.
Posted by fastman 10 months ago
VFM to be clear I have no view of these --so stop assuming I do !!!!

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