BT Bid for all Broadband Contracts as UK Gov Shun Universal Service Obligation

The UK government’s Communications Minister, Ed Vaizey, has confirmed that BT are officially bidding on all 8 of the currently active superfast broadband procurement contracts (more will follow). Separately Vaizey said that “the time is not right” to introduce a legal Universal Service Obligation (USO) for broadband.

The government’s Broadband Delivery UK (BDUK) office expects the final regional Local Broadband Plans (LBP) to be “agreed” by the end of this month (April 2012). At the last count, in March 2012, over 18 of the 45 LBPs (40%) had already been approved, except for North Tyneside and South Tyneside (both aim to meet the rollout target without BDUK funding), and of course 8 have already proceeded to tender.

LBP’s Currently in Procurement

* Rutland
* Cumbria
* Hereford and Gloucestershire
* North Yorkshire (York)
* Lancashire, Blackpool, Blackburn with Darwen
* Surrey
* Highlands and Islands (Scotland)
* Wales

The news that BT are officially bidding for all of the above eight is by no means surprising, especially since they appear to have already won the contracts for Rutland (here), Lancashire (here) and look almost certain to finalise in the Highlands and Islands (here) and Wales (here) too. It is for local authorities to pick who wins but most only appear to have two choices.

We fully expect BT to bid on all of the LBP’s but the real question is whether or not they will be the sole beneficiary of public funding (most observers expect such an outcome). A somewhat unproven Open Access Wholesale Network alternative from Fujitsu (backed by Virgin Media), which once promised to bring symmetric FTTH speeds of 1Gbps to 5 Million homes in rural areas by 2016, has yet to win anything despite claiming last summer to be “heavily involved” with the process (here).

Communications Minister, Ed Vaizey, told MPs yesterday:

“BT are bidding for the eight projects currently in procurement, and are one of the suppliers bidding to be included on the Broadband Delivery Framework which we expect will be used for most of the remaining procurements for the rural programme.

City authorities will be allocated funding from Urban Broadband Fund and will be responsible for the supplier selection under their respective procurements.”

The government ultimately hopes to make superfast broadband (25Mbps+) ISP services available to 90% of the country by 2015 (the last 10% will have to make do with at least 2Mbps), yet it’s often noted that this is merely a “commitment” and not a legally required Universal Service Obligation (USO).

An article on The Register today notes that Vaizey was asked about the lack of a broadband USO by Tim Farron MP (Lib Dem), his reply was that a USO could damage private sector investment. He also noted that only Finland, Spain and Malta in the EU had included broadband in their national USO.

Ed Vaizey added:

“The UK’s position is that the time is not right to introduce a broadband USO as it may constrain private investment in networks. The current non-regulatory approach to delivering universal broadband is considered the most effective means of stimulating commercial investment while minimising costs to the public purse.”

Others might perhaps argue that the lack of a USO, even if only applied to the basic 2Mbps+ commitment, could potentially damage the growth of new business and hinder domestic connectivity.

So far the government has set aside £530m to support its broadband goals. A further £150m was recently added for super-connected cities (Urban Broadband Fund) and another £100m (total £780m) will come from European funding. On top of that both local authorities and the private sector are expected to match these commitments.

Meanwhile Europe’s Digital Agenda strategy expects to make superfast broadband ISP speeds of 30Mbps+ available to everybody by 2020. The UK government has already noted that a further £300m could be added to BDUK’s budget (between 2015 and 2017) by using some of the BBC’s TV Licence Fee, which would help it to plan for future developments in the post-2015 period.

An important progress update from UK government’s Department for Culture, Media and Sport (DCMS) is expected within the next few weeks. BT has repeatedly stated that its superfast broadband service could be expanded to cover 90% of the UK, but only if it won most of BDUK’s budget.