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

    Comment number 845.

    If we wanted to save money we could close the DCMS they seem terminally useless. Turn the lights off sack the staff and most of us wouldnt even notice!

  • rate this

    Comment number 844.

    It's amazing how many people have jumped on the anti-HS2 train! HS2 will mean that everything can be less London-orientated, e.g. putting the UK airplane hub in Birmingham, which will help generally help rural areas.

  • rate this

    Comment number 843.

    This is more lefty nonsense following on from Milliband's embarrassing fantasy manifesto yesterday.

    I enjoyed listening to Margaret Hodge making an utter fool of herself this morning on Radio 4, insisting that "virtually all" means 100%, and other totally fanciful comments.

    Ed Vaizey did well to rebutt the nonsense from this demented little raptor.

  • rate this

    Comment number 842.

    What is this RURAL business? The whole point of rolling out broadband country wide is to enable people to work from home, to encourage new business hubs and utilise more of this country than LONDON. What about Rural schools? Are they not entitled to proper broadband coverage for education purposes.

  • rate this

    Comment number 841.

    Broad-band in rural areas will lift property prices for the owners. One person pays, another collects the net financial benefit.

  • rate this

    Comment number 840.

    Which means I'm subsidising you
    Trolls pay tax!

    The government want universal broadband so they can cut costs by providing on-line interfaces instead of civil servants providing frontline services directly to the public. It is investing to save money in the long run. We are subsiding future generations.

  • rate this

    Comment number 839.

    'it's about the people who farm and grow the stuff that YOU NEED to buy.'
    You mean the ppl who are heavily susbsidised from tax payers pockets to grow stuff we need (although most is imported from outside the country) now want more of the tax payers money for broadband. How about getting a satelite dish?

  • rate this

    Comment number 838.

    I am not sure what the PAC is waffling on about (again)

    BT are spending several BILLION on the rural roll out, more than half of it is their own investment, and they wont see a return for 15 or more years.

    Which other company would go for that deal? Well, none, actually.

    So the PAC should shut up and be grateful.

  • rate this

    Comment number 837.

    Nobody ever mentions Kingston Communications' monopoly in Hull; which they've had for decades!
    The cheapest available tarriff in Hull is £31.99 per month for on average 4mb I have been offered free broadband with my mobile phone contract, included in sky packages etc, but nobody in Hull can access these!
    Surely this is as much of an outrage for the 300,000+ people living in the area?

  • rate this

    Comment number 836.

    With the private sector choices available for these contracts, surely the only option for the government was to burst into tears.

  • rate this

    Comment number 835.

    757. GGG
    What a joke Labour is becoming, Ed seems to want to take the UK on a trip back in time to the 1970's.

    Wouldn't be a bad thing. At least in the 1970's services were provided for everyone, and not just where it was profitable!

  • rate this

    Comment number 834.

    Margaret Hodge has never delivered anything worthwhile for the public in her life. She sits there as chair of this influential committee and pontificates on things she knows nothing about and instead of acting in an impartial way, allows party dogma to drive he criticisms. She's anti business in every way - only inefficient public services for her!

  • rate this

    Comment number 833.

    But if you stop BT ripping us off, the power will go off... oh sorry that was another successful privatization. Surely asking for service in the countryside, not focusing only on big profits is taking us back to the 1970's?

  • rate this

    Comment number 832.

    We should create Not for Private Profit companies so that NPPs can handle these large projects. They can make enough profit to operate, pay their costs including decent salaries, invest and borrow, but will not be able to benefit shareholders. Private enterprise can supply services to the NPPs which will be sufficiently commercially astute to handle predatory capitalists, unlike civil servants.

  • rate this

    Comment number 831.

    I live in Canterbury, Kent. Allegedly, it's a city. My "broadband" speed? Just over 2MB. Yeah, REALLY. Rather cheesed off!

  • rate this

    Comment number 830.

    Put it into perspective. With the amount that we had to bail out the banks, we could all have had a 1Gb connection with that money ..... for £20 per month

  • rate this

    Comment number 829.

    Greater transparency for the customer will be when the hugely inflated broadband speed of 'up to **MB/s' is measured at the exchangebox and not in the home!

  • rate this

    Comment number 828.

    @165. jimmyroyce I don't live in the country, I live 10 minutes from the M1 in Derbyshire yet I'm only able to get a 2Mb Internet connection. Go 10 minutes north or south and I could have 76Mb! So yes I expect to pay the same for my services.

  • rate this

    Comment number 827.

    We're getting ripped off by having to take a land line with broadband, which most people don't want or use.

    As for the incentives - they're clearly needed as it will never be profitable to roll out to the countryside. I think it's good that the country are trying to build the infrastructure over the whole country. The internet is life's great luxury these days - more important than the TV.

  • rate this

    Comment number 826.

    Just another case of people in this country being milked by a few.

    Why ?

    Because they can.....and no-one of us, it appears, can change anything.


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