Two more Project Gigabit contracts fail

A statement from DSIT has revealed that two Project Gigabit contracts previously awarded to Full Fibre Ltd have ended based on a mutual agreement.

BDUK and FullFibre have mutually agreed to terminate the Project Gigabit contract for the Peak District. BDUK is now moving swiftly to put in place alternative plans with other suppliers to connect premises that were due to be covered by this contract.

Statement on Peak District contract page

The two contracts are for West Herefordshire and the Forest of Dean and the Peak District. The wording is the same in both cases and potentially means delays in bringing full fibre to around 12,300 premises in the two contracts valued at £34.1 million.

While it’s possible the other suppliers might be an altnet, we suspect that Openreach will end up being the supplier of last resort in cases like this.

The first premises had been expected in late 2024, and while we cannot be sure since the news has only just emerged people who were likely to benefit are looking at having to wait an extra year, or maybe even longer.

The Project Gigabit contracts were first awarded in a golden age period when investment was more readily available and interest rates on debt was lower. The interest rates from the last few years are impacting heavily just as they did with homeowner who may be stuck with higher interest rate mortgages signed in the last two years. Full fibre rollouts would seem a reasonable long term investment as its permanent infrastructure. The problem is that investors worry more about their rate of return than what is actually built, and with higher interest rates there are other places they can risk their money for a good return.

The two contracts gave Full Fibre Ltd a subsidy of around £2,770 for each property. This subsidy level looks reasonable compared previous subsidies in the superfast rollouts even where they delivered full fibre. A lot depends on which premises each contract was targeting as it does not take many remote clusters of 3 or 4 properties to mess up the average deployment costs.

One other variable has been the decline in the public accepting new overhead infrastructure in areas. It is highly likely that costs for constructing new ducting in areas with no PIA options meant the subsidy built into the contract was not going to deliver the contracted number of properties.