Rural broadband rollout: Taxpayers being 'ripped off', say MPs

 
Rural home Rural dwellers say they want the same broadband speeds as those living in cities

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The taxpayer is being "ripped off" over the cost of rolling out broadband to rural areas of the UK, MPs have said.

The Commons Public Accounts Committee (PAC) says the government "mismanaged" the project by awarding all 26 rural broadband contracts to BT.

It also said BT had "exploited its quasi-monopoly position" as the main provider.

The government defended the process as fair, while BT said it was "disturbed" by the claims which were "wrong".

'Failed to deliver'

Making sure that those living in the countryside get broadband speeds comparable to those living in towns and cities has long been something the government has grappled with.

Public Accounts Committee chairwoman Margaret Hodge said taxpayers had been ''fleeced''

Commercial firms such as Virgin Media and BT see little profit in rolling out services to areas with few people living in them.

So, as an incentive, the government provided a subsidy pot of £230m for firms taking on the task, with an extra £250m available after 2015, and it awarded contracts on a county-by-county basis.

Local authorities are also contributing £730m to the project, bringing the total amount of public funding to £1.2bn.

But only Fujitsu and BT entered the bidding competition, with Fujitsu later withdrawing.

BT has so far been chosen in 26 counties and is expected to win the 18 remaining contracts.

The report by the PAC criticised the government's management of the project: "The Department for Culture, Media and Sport's design of the rural broadband programme has failed to deliver the intended competition for contracts, with the result that BT has strengthened its already strong position in the market."

Broadband speeds around Europe

  • Denmark plans to have 100 megabits per second to all by 2020
  • Estonia wants 100Mbps for everyone by 2015
  • France plans almost universal coverage at 100Mbps by 2020
  • Germany expects to have around 70% coverage at 50Mbps by 2014
  • Greece wants 100% of citizens to have access to 30Mbps by 2020
  • Ireland plans 100Mbps for all by 2020
  • Italy wants to see half of its citizens have access to 100Mbps by 2020
  • The UK's target is 90% coverage by 2017 but at the lower speed of 24Mbps

It said its contract terms were "overly generous" to BT and did not "promote value for money".

It also accused ministers of failing to check whether BT's bids were reasonably priced and said there had been "wildly inaccurate" estimates of costs.

"Local authorities are contributing over £230m more to the programme than the department assumed in its 2011 business case and BT over £200m less, yet BT will ultimately benefit from £1.2bn of public funding," the report said.

Committee chair Margaret Hodge added: "The taxpayer has been ripped off with £1.2bn going to the shareholders of BT.

"If you (the government) had devised it differently, had bigger areas for the contracts so you could spread your costs more, allowed different technologies to be used and insisted on a 100% coverage, we would have found other people in the game and I bet we would have spent less of the taxpayers money."

Media minister Ed Vaizey told BBC Radio 4's Today programme the costs were "not out of control", stressing BT was "putting up more than a third of the costs of rural broadband".

"BT is delivering under our scheme to up to 10,000 homes now; it will deliver to millions of people over the next two years with the best value-for-money, government-sponsored broadband scheme you will pretty much find anywhere in the world."

Culture Minister Ed Vaizey said the broadband programme is ''very good value for money''

He said only BT and Virgin had the infrastructure to roll out the broadband, adding Virgin had not wanted to open their cable up for other companies to use - whereas many companies used BT.

Vodafone said the project would "not deliver value for money nor the rural connectivity that Britain needs", and urged the government to revise the process to encompass wireless 4G.

'Transparent from start'

BT was further criticised in the report for failing to provide local authorities with full information about where exactly it would roll out superfast broadband services, which in turn hampered rivals from drawing up alternatives.

And it was criticised for including a clause in its contract preventing local authorities it dealt with from disclosing the costs involved to other authorities negotiating contracts.

This lack of transparency meant the company "exploited its quasi-monopoly position" to limit access to both the wholesale and retail market "to the detriment of the consumer", concluded the report.

BT said it was disturbed by the report, "which we believe is simply wrong and fails to take on board a point-by-point correction we sent to the committee several weeks ago".

It added: "We have been transparent from the start and willing to invest when others have not.

"It is therefore mystifying that we are being criticised for accepting onerous terms in exchange for public subsidy - terms which drove others away."

bbc map of broadband coverage

It denied it had failed to deliver value for money for the taxpayer and said that, even with the public subsidies, it would take it 15 years to pay back its investment in rural broadband.

"Rolling out fibre is an expensive and complex business," it said.

BT's "point-by-point correction", sent to the committee on 13 August, included 83 comments responding to statements made at a committee meeting a month earlier.

It described many of the comments, on issues from the percentage of households reached to the way the contracts were awarded, as "false" and "misleading".

Dave Reynolds on fast internet services in Devon

The report recommended the government should publish BT's detailed rollout plans so other suppliers could offer services to the final 10% of the population that would not be covered under current plans.

It said the DCMS should not spend any more money until "it has developed approaches to secure proper competition and value for money".

In 2011, then Culture Secretary Jeremy Hunt announced 90% of premises in every local authority area of the UK should have access to internet speeds above 24 megabits per second by May 2015, with a minimum of 2Mbps for others.

The process has suffered huge delays and is due to be completed in 2017, nearly two years later than planned.

But, according to Matthew Howett, an advisor at Ovum which examines the commercial impact of technology, the delays were down to the EU's failure to approve the scheme.

He said the "challenges of deploying to the most rural and remote areas of the UK shouldn't be underestimated" and that there were not many providers who could do this.

 

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  • rate this
    0

    Comment number 225.

    I'm not sure that the taxpayer should subsidize people who choose to live in rural areas.

  • rate this
    +2

    Comment number 224.

    179. Further.
    Rural communitys should be aware of & beware of what they wish for.

    As I mentioned, some gov services will close & move to internet, also many rural areas are not presently attractive to development/house building just because of no broadband.

    As broadband spreads, so too will development, smaller communitys will grow and some become more urban than rural

  • rate this
    +7

    Comment number 223.

    No broadband company rolls out fibre - and we are in south Lincolnshire! New build sites, like mine, should have been built with fibre links, not on BT lines. There needs to be a planning framework which places the onus on builders and BT (and other providers ) to build with fibre FIRST. As well, since more have been built, service has been poor. Too many on the same line affects service.

  • rate this
    -2

    Comment number 222.

    ... and I wish people would stop bashing Indian call centres.

    On the vast majority of occasions I have dealt with them they have either sorted the problem, or if they can't, referred me back to a UK based CS agent; who is usually, unsurprisingly, far less polite.

  • rate this
    -1

    Comment number 221.

    @Pammij

    Who's your suppliers?

  • rate this
    +2

    Comment number 220.

    #196 - are you seriously suggesting that customers actually got better services when these utilities were state-owned? You don't recall the waiting lists to get telephones? Power outages? Think you're suffering from selective memory loss!

  • rate this
    +4

    Comment number 219.

    I'd like to point out that most people who live in rural towns are not rich. Many of us are quite poor!

    I never 'chose' to live in the countryside, I was born here. My family couldn't afford to move to a city where house prices and the cost of living are much higher.

    If you want to complain to rich folk, look to the financial districts of our major cities - all of which have fantastic broadband.

  • rate this
    -1

    Comment number 218.

    I think it is wrong that the UK taxpayer should be expected to fund a private limited company's development of an asset (infrastructure) that by rights ought to be developed as a standard commercial investment using the traditional mix of reinvested profit and shareholders' capital.

  • rate this
    -1

    Comment number 217.

    I wouldn't mind speeds slower than in cities, but I live in a rural area and my (and neighbouring households') internet frequently cuts out completely for an hour or more at a time. BT have had engineers up and identified the problem, but outright refuse to fix it - basically, unless a large number of customers are affected, they don't care! They know we have no alternative. Disgusting.

  • rate this
    +1

    Comment number 216.

    if you don't get the service you should not have to pay the same as for someone in a urban area who gets fast broadband. Slow broadband should be reflected in lower prices. However, this doesn't happen and you pay the same whether it is poor service or not. And this is a monopoly - doesn't matter which ISP you use in rural areas. They get away with it by offering speeds of "up to".

  • rate this
    -3

    Comment number 215.

    I don't see why we are subsidising 19th Century technology for 21st Century problems - remember this is paying for people to dig up roads and lay cables when wireless technology could give us all the same or better performance if we invested the country's resources differently.

  • rate this
    +1

    Comment number 214.

    Good luck to the "Rural" customers. Here, less than 2km from the exchange in a major city, the service is appalling. Multiple service drops every day and often struggling to reach much more than 3Mb on a line supposedly capable of 8Mb. In over a year BT have been unable to locate or fix the fault.

  • rate this
    +1

    Comment number 213.

    I don't live in a rural location and a mere mile from the exchange, but I've been told there is no intention of installing fibre in our street cabinet (not economically viable; info. after complaining to my MP) - they claim 94% coverage in my town. Even if BT are cherry picking the cabinets weighted in favour of their customer base or not, we should insist on a nation of fibre for ALL.

  • rate this
    +1

    Comment number 212.

    24 MBPS by 2017? I'm almost getting that now! Talk about slow on the uptake!

    And I bet the govt will still have the audacity to refer to the country as GREAT Britain.

    Not!

    Also, why are people critical of those getting a decent broadband service in rural areas?
    Were these same people critical when rural areas were connected to the national grid, or when they could get telephones?

  • rate this
    -1

    Comment number 211.

    1) Can anybody point to an application that actually uses 100mb?
    2) Normal customers will have a low CoS and will join a queue at the first access server, hence 100mb is irrelevant!
    3) Running several HDTV applications only needs 20-30mb/sec.
    4) "Yes, we want broadband, but "
    a) "You can't put that green cabinet in the village."
    or
    b) "You can't put that radio-mast in the village."

  • rate this
    +4

    Comment number 210.

    In Bodmin Cornwall we have the Superfast option. In some parts of Scotland however a carrier pigeon would be a better option. Scrap HS2 and stick the cash into broadband.
    After all its 'beam me up Scottie' not 'lets get the HS2' Scottie!

  • rate this
    +3

    Comment number 209.

    197.919er
    It's not just the country, it's worse than that. BT are not even rolling out fibre in parts of London. They refuse to equip the cabinet I am on, I suspect because there are not enough customers to profit by. It is all about MONEY!
    ---
    I did think BT was a business & not a charity, was I wrong?

  • rate this
    +3

    Comment number 208.

    As I drive about the myriads of country lanes I have to think what is all the fuss about laying a cable no thicker than my thumb.

    If Edwardian technology can lay thousands of miles of country lanes, then what on earth is the barrier to using 21st century technology to cut a slit down those road lengths to bring civilization to the rural communities?

    Someone, somewhere is dragging their feet.

  • rate this
    0

    Comment number 207.

    Rural life has many advantages such as being a good environment to bring kids up in, peace and quiet, no light pollution, zero crime etc. but there are disadvantages such as the nearest shop/pub being 7 miles away and 1.5 / 2Mb broadband etc.
    People in cities whinge about aircraft noise, traffic, immigration, pollution etc. but they can’t have it all, advantages and disadvantages at all turns.

  • rate this
    0

    Comment number 206.

    #183.

    Re-nationalising broadband? It was never nationalised in the first place. Unless you think we should have government controlled broadband?

 

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