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UPDATE4 First BDUK Fuelled BT “Fibre Broadband” Take-up Figures Emerge

Tuesday, November 25th, 2014 (9:15 am) - Score 2,059

Attempts to secure information about the take-up of BTOpenreach’s “fibre broadband” (FTTC/P) services and related claw-back provisions under the Government’s Broadband Delivery UK programme are often futile (we’ve tried asking BT, BDUK and many councils without success), yet a recent Freedom of Information (FoI) request has managed to secure related information.. albeit only for Wales.

The ability to understand uptake of services supplied under the BDUK contract, which aims to make fixed line superfast broadband (24Mbps+) speeds available to 95% of the United Kingdom by 2017, is crucial in order to judge progress and asses how much benefit might be derived from the claw-back mechanism.

Claw-back allows money (i.e. the BDUK subsidy) to be returned and reinvested into adding further coverage once a certain percentage of take-up has been achieved. Mind you some contracts aren’t as clear, with Staffordshire’s simply saying (here) that subsidy returned via claw-back should be “returnable to public funds“.

A recent article on the FT suggested that if 50% take-up were ever achieved, across the whole of the United Kingdom, then that could be worth as much as £270 million (i.e. money available for reinvestment to improve superfast broadband coverage etc.). A number of BDUK contracts are understood to have set their claw-back level as starting at 20% take-up.

BDUK’s Claw-back Mechanism (EC State Aid Monitoring Requirements)

To facilitate exercise of the claw-back provision, the UK will oblige local bodies to impose on their suppliers a number of reporting obligations. These obligations will require regular reporting on matters such as: actual deployment; actual expenditure; and demand levels. An accounting separation will be imposed on the selected bidders within the Framework Agreement as regards the subsidized projects that will make it easier for the granting authorities to monitor the implementation of the projects as well as any excess subsidy.

According to the above description and its associated “transparency requirements“, which is all taken from a state aid decision on the BDUK framework, local authorities (i.e. county councils) should ideally be keeping track of take-up and it follows that BT should thus similarly be able to separate their commercial FTTC/P uptake from those funded via state aid.

In practice ISPreview.co.uk and others, such as Patrick Cosgrove of the Shropshire and Marches Campaign, have asked multiple councils, BT and BDUK but until recently we’ve almost never been given a clear answer. Openreach usually directed us back towards the councils, while the councils would say they didn’t hold such data and BDUK said they’d look into it but then never responded despite prompting. We did a lot of prompting.

In the example of Gloucestershire and Herefordshire, which jointly form the local Fastershire scheme, the excuse given via the Whatdotheyknow website was to claim that Fastershire is not subject to Freedom of Information (FoI) requests because the partnership also involves BT, a private company (here we go again). Not that it matters because asking Fastershire directly also resulted in a response claiming that no such data was held.

But the good news is that recently some data has begun to leak out, although at present the compliance on this front remains woefully inadequate. For example, at the end of September 2014 we understand that Shropshire was running a BDUK specific take-up of 8% and last night Patrick Cosgrove contacted ISPreview.co.uk to say that he’d also managed to squeeze some detailed data from the scheme in Wales.

Mr Cosgrove asked for the percentage take-up of superfast broadband where green cabinets (or Exchange Only lines) have been upgraded with fibre-optic cable as part of the BDUK-funded rural broadband project for the three most recent quarter years: (January, February and March 2014 (Q1); April, May and June 2014 (Q2); and July, August and September 2014 (Q3). Amazingly he got the following in reply.

wales uk bduk take-up for clawback

The “Cabinet Age” is likely a reference to how up-take changes over time after the cabinet is first installed / upgraded, which will also vary depending upon how many premises have been upgraded within a given timeframe etc. It’s a useful indication of where things are heading, which is despite the overall figure for September 2014 sitting at only 11.98% (up from 9.48% in Q1 2014). The roll-out in Wales, much like most of the rest of the UK, is of course continuing and so this does have an impact. Take note that the project in Wales recently reported making the “fibre broadband” service available to 276,000 premises (here).

Meanwhile the Broadband Delivery UK programme recently hinted at plans to launch a big advertising campaign in order to help raise awareness about the availability of the faster connectivity (here). Often people don’t even realise when their area has been upgraded or incorrectly expect to benefit by default and others still don’t understand what “fibre broadband” actually is (funnily enough.. neither does the ASA *chuckle*).

At the same time most of the work so far has focused on delivering improvements to sub-urban areas or larger towns, where many people can often already receive reasonable connections using older ADSL2+ services (i.e. it’s harder to sell FTTC to somebody happy on 10-15Mbps ADSL2+, especially if they’re paying considerably less). By contrast those in slower rural areas can easily see the appeal, but they’re often last on the upgrade list and have a considerably smaller population density (i.e. less of an influence on the overall figures).

All of those and other factors can influence take-up, which means we shouldn’t really be expecting to hit that 20% mark just yet given that most projects have only been deploying for a year or so (in some cases the roll-out has only recently started). Never the less we should all be expecting more transparency from our local authorities concerning the reporting of take-up progress, which has so far proven difficult to achieve and that’s despite its crucial relevance to the assessment of claw-back.

UPDATE 26th Nov 2014:

According to enquiries made by Patrick Cosgrove, the BDUK scheme in Dorset has so far seen take-up of 7.2%. But in fairness the practical roll-out phase for that project is still fairly young.

UPDATE 27th Nov 2014:

We thought it might be useful to note that the Government issued a sort of FAQ on the Claw-back mechanism in July 2014 (here), while the European Commission’s original state aid decision on the BDUK framework can be found HERE. Most of the industry will be familiar with these documents already but as we quote the EU’s monitoring requirement above then it’s relevant to provide the full and supporting documentation.

Separately we also thought it might be useful to reflect Staffordshire’s full position on Claw-back in their contracts, which stems from their Local Broadband Plan documentation (here).

Staffordshire’s Claw-back Approach

Under the terms of the grant contract, the supplier will be monitored for a period of seven years. If the actual investment gap is larger than £29.76m then it will be the responsibility of the supplier to absorb those extra costs – the capital grant will not be increased. However, if the actual investment gap is proven to be less than £29.76m then a clawback clause will be activated.

This is a legal requirement under State Aid law, because the value of public investment in commercial infrastructure to address market failure must be proportionate and reasonable – it is not permissible to have invested excess funds, and any excess will be returnable to public funds.

UPDATE 5th Dec 2014:

The county of Worcestershire has now reported a figure of 3.2% for the same period, although most of their premises were only covered in September 2014 and so the figure was bound to be low.

UPDATE 9th Dec 2014

Patrick has further been able to extract the take-up data for the Fastershire BDUK project, which covers the two counties of Gloucestershire and Herefordshire in England.

End of March 2014 = 7.31%
End of June 2014 = 12.22%
End of September 2014 = 13.40%

Leave a Comment
41 Responses
  1. Avatar nga for all says:

    Clawback is meant to recover the premium for take up risk. It does not and cannot correct the inflated milestone payments. Invoices have to be trawled through and challenged.
    This is a £100 to change a light bulb territory.

    1. Avatar nga for all says:

      @steve why has not one phase 1 project not announced some operational efficiencies. All are paying milestone payments averaging more than £40k for cabinet.

    2. Avatar No Clue says:

      Gets worse than that NGA. The BT fanatics here bang on about cost per premise perhaps they should get their calculators out for this…
      http://www.techweekeurope.co.uk/workspace/bduk-wales-broadband-fibre-150036

      BDUK 57 Million
      Welsh Government 58 Million
      ERDF (When the maths is done from that page) around 90 Million

      Total TAX PAYER CASH therefore equates to £205 Million quid.

      Currently (according to this news item) FTTX there is available to 235,000 homes with only 11.98% which have taken it thus far…

      Or (doing the maths again quickly again) that is around 28,000 premises/lines that have taken the service.

      Take that 28,000 take up figure and the 205 Million figure and that works out to a cost of something like £7,300 quid THUS FAR per LINE.

      Clawback???????… Good luck with that. BT the bargain choice for the tax payer lol

    3. Avatar MikeW says:

      @NFA
      How do you know that there *are* milestone payments? And how do you know how much they are? And how do you know all council contracts have the same milestone payment amounts?

    4. Avatar Steve Jones says:

      @MikeW

      Quite simply he doesn’t know.

    5. Avatar Unknown101 says:

      That money is for the whole of the Welsh BDUK rollout, your basing your current calculations when the rollout isn’t finished…. Do the calculations at the end.

    6. Avatar nga for all says:

      @steve, mikew see north yorks reports available online.

    7. Avatar The truth says:

      Isn’t North Yorkshire a standard unit cost contract for ERDF purposes?

    8. Avatar NGA for all says:

      @ The Truth
      No – Appendix shows payments of £177 per premise passed consistent with the milestone payment process and consistent with average subsidies of more than £40k+.

      You would expect from the article the actual invoices minus BT’s self certified contribution to be referenced with the savings ploughed back into extending the rollout further.

      It was hoped if not expected that the above step would take place before any extension monies were agreed. Either the invoices are not being generated or they are not being checked.

    9. Avatar No Clue says:

      “That money is for the whole of the Welsh BDUK rollout, your basing your current calculations when the rollout isn’t finished…. Do the calculations at the end.”

      which is why i CLEARLY STATED…
      “Take that 28,000 take up figure and the 205 Million figure and that works out to a cost of something like £7,300 quid THUS FAR per LINE.”

      DO AT LEAST TRY TO PAY ATTENTION.

    10. Avatar Steve Jones says:

      @No Clue

      The project is only part way through, only some of the money has been paid and, what’s more, take up builds up over time. Taking full project costs and dividing them by take-up to date is no way of evaluating a long term investment. On that basis almost every major infrastructure investment ever made is disastrous. We would never have had comprehensive mobile coverage if progress had been assessed after a couple of years on a part rolled-out system. It took a decade or more to build up top the current 87% penetration rate (by premises). The evidence will build up over the next few years. The BT payback period is, I believe, 15 years.

      nb. as clawback gets invoked, that public cost per

    11. Avatar Steve Jones says:

      That comment ended prematurely and was meant to say:-

      nb. as clawback gets invoked, that public cost per line used will reduce very fast

      (For some reasons, Firefox on my laptop throws in the odd control code. This time it was the enter button. Odd.)

    12. Avatar Raindrops says:

      “The project is only part way through, only some of the money has been paid and, what’s more, take up builds up over time. Taking full project costs and dividing them by take-up to date is no way of evaluating a long term investment.”

      1) No it just demonstrates what it potentially can cost.
      2) You have no idea what the final costs will be it could be less or more than what he has mentioned
      3) Most of the BDUK and similar for that area is complete the rest due in early 2015, unless millions more take FTTC within the next 6 months that 7 grand per line calculation will not change much.

      “as clawback gets invoked, that public cost per line used will reduce very fast”

      For there to be any clawback enough people have to take it first, at the rate of growing only approximately 1-1.5% per quarter as it currently has thats going to take a hell of a long time to make a significant dent in costs, potentially more than 15 years as at some point take up will slow NOT increase.

  2. Avatar Shane says:

    The problem is advertising and lack of knowledge (not a bad thing) There are those that want all singing/dancing internet and those that probably wouldn’t know the difference as they only use Facebook (and Facebook is always slow)

    I know there have been reports of 1.5 million premises reached, but i’d be interested to know what proportion of that 1.5 million, would a) actually sign up to have the internet capabilites (OAP’s, technophobes etc.. and b) choose superfast broadband option over their current speed.

    Those are the numbers that should be published as i’m sure it will show that a lot of people didn’t actually want what they were shoving in their face.

    It’s like U2 and Itunes all over again…..

    1. Avatar Steve Jones says:

      There is some Ofcom information about broadband takeup on the attached link. The what proportion of premises have fixed line broadband is easy. Apparently that’s 83% (and rising year-on-year).

      It doesn’t show “superfast” take-up by premises, but as it has both the number of fixed-line broadband and superfast per hundred people (34 & 9 respectively), then a reasonable extrapolation is that around 26% of broadband connections as “superfast”. Not the same thing as FTTC takeup of course, as it includes cable and a modest amount of FTTP (I doubt mobile counts), but I suspect netting out cable connections would indicate FTTC penetration somewhere around 20% of all DSL connections. Note that there’s been a big jump in “superfast”.

      Personally, I suspect national FTTC penetration rates up to about 40% will be achieved in the next few years, but progress will then be slower as it competes with cheaper ADSL. However, there’s some hope that wholesale rates for FTTC might come down if penetration rates really get that high, as it has a radical effect on costs. The fixed costs of VDSL are high, but the marginal costs per line are (installation apart), low. I think there will be room for £2-3 per month reductions in wholesale rental costs if FTTC penetration nears 50%. Ofcom’s forbearance on regulating FTTC pricing only applies for a limited time.

      http://stakeholders.ofcom.org.uk/binaries/research/broadband-research/scorecard/European_Broadband_Scorecard_2014.pdf

  3. Avatar Col says:

    Low take up does not surprise me.

    In a lot of cases FTTC cabs are positioned in areas of good ADSL2 performance which is suitable for many average homes.

    I live 4.5 km from my exchange along with 200 houses. We have no FTTC.
    Owing to our long lines the take up would be greater but the down side is having to pay more for increased bandwidth because of our distance from the exchange.

    1. Avatar Steve Jones says:

      Are you scheduled for an FTTC upgrade under BDUK (or any other local initiative). The current BDUK approach is “inside out”, so the locations with highest costs per household are done last (which includes non-FTTC solutions). Also, I suspect they don’t know how much money will be “left in the pot” after the contractual commitments are met. The evidence appears to be that most BDUK projects will exceed the original target coverage.

    2. Avatar Ben Haines says:

      Spot on Col.

      Lets look at Gigaclear. Targeting areas with poor connectivity and they quite easily achieve the 30% sign up target (and that is just to get the dig to start!).

    3. Avatar No Clue says:

      Yep just a tad better than this approx 11% take up flop.

    4. Avatar TheFacts says:

      Near 20% after 1 year.

    5. Avatar No Clue says:

      It is 12% take up, not the 18% you quote elsewhere or the 20% here, no matter how many times you troll days after a person posts.

  4. Avatar Stephen says:

    The trouble with the rollout is that the people who need it the least get it first and the people who need it most still don’t have it. I think that takeup figures will increase much quicker now that it (FTTC) is starting to reach more rural locations. Just wait until FTTRN rolls out, I expect a high percentage of users will switch from their sub 2MB/S speeds to a much better product. If they aren’t already receiving 4G!

    1. Avatar Shane says:

      I agree. Parts of my area is due end of 2014, but the most part won’t get in until 2016. At present I can get 0.75 – 1 mbps. That’s if I was to have BB (as to which most of my neighbours do and pay full price for that service….) but my exchange is cover around 1200 homes, so wouldn’t really dent the figures of 1.5 million.

      Pays to live in a city for technology, pays to live in the country for peace and quiet…

    2. Avatar Stephen says:

      I think that ISP’s should charge per household speed, so that the people with slower speeds pay less than people with faster speeds.
      Imagine you and your mate both paying £3 for a beer & you get a 2 pint pitcher while he gets a half pint!!!!

    3. Avatar X66yh says:

      @Stephen
      I don’t think you have quite worked out the consequences of your plan.

      Those with the slowest speeds will pay the least – and so there will be even less incentive with less money coming from them to upgrade them.
      Added to which those with the slowest speeds in general are going to cost the most to upgrade….and indeed the most merely to maintain/repair their current infrastructure.

      So the net effect will be that NO isp will be interested in taking on a very slow line and those customers on the slowest lines will be unable to find a broadband provider willing to serve them.

    4. Avatar No Clue says:

      “Those with the slowest speeds will pay the least – and so there will be even less incentive with less money coming from them to upgrade them.”

      The whole point of schemes was for tax payers as a whole to upgrade not spots, so it would make little difference what they are or are not paying.

    5. Avatar Shane says:

      That’s where the BDUK project comes in surely, by not it should be a requirement that we have internet in every home….

      Surely consumers rights need to be taken into account, you don’t hear BT saying ‘Well Mrs X we can give you internet but because it’s a poor speed we’ll knock X amount off’ they charge a flat rate.

      You don’t get this anywhere, you don’t order a car and get half a car and still pay for it. It’s catch 22. People on my road don’t buy internet because it’s too slow, i’m sure they would including me if it was of a good speed.

    6. Avatar No Clue says:

      Exactly… He did not think that argument through.

  5. Avatar GNewton says:

    So why hasn’t a proper transparency been made a condition under the BDUK/EU rules for state-funded broadband? Or has it, and the BDUK plus local councils are simply bypassing the rules?

    1. Avatar No Clue says:

      More than likely just passing the buck back and forth because when the figures are scrutinised they will not make sense or look as big a bargain as promised.

    2. Avatar GNewton says:

      I know there are commercial confidentiality clauses in many BDUK contracts. But how do they agree with the EU rules?

    3. Avatar TheFacts says:

      What happens with other government or local council contracts regarding confidentiality?

    4. Avatar No Clue says:

      LMFAO so now FTTC and if people buy it or not is a f****** trade secret is it LMFAO

    5. Avatar Gadget says:

      Suggest you continue reading the document past 43(1) to 43(2) before making more comments on your state of humour

    6. Avatar Raindrops says:

      @No clue I think he is try to argue its a commercial interest for BT not to disclose info. That would maybe work if it was not for page 11 exceptions…

      “Generally speaking there is a public interest in the disclosure of commercial information
      in order to ensure that:
      there is transparency in the accountability of public funds”

      So yeah he is right someone should had read the whole thing first cos clearly he didnt.

    7. Avatar TheFacts says:

      Would this include invoices from suppliers?

    8. Avatar No Clue says:

      It would include anything quoted in the document you referred to and still have not read.

  6. Avatar Gadget says:

    And again to just carry on from your quote an important extra paragraph which you appear to have omitted….

    “Factors that might weigh in favour of the public interest in withholding information in this area include:

    where disclosure would, as a consequence, make it more difficult for individuals to be able to conduct commercial transactions or have other dealings with public bodies which are not a typical commercial transaction – for example where an organisation obtains a grant or financial assistance from a public authority – without fear of suffering commercially as a result. It would not, for example, be in the public interest to disclose information about a particular commercial body if that information was not common knowledge and would be likely to be used by competitors in a particular market to gain a competitive advantage”

    So there is probably a middle road/balancing act which should maintain accountability (for example there could be a requirement to audit by an external body) and give overall visibility one the one hand, and the release of detailed commercial information into the public domain.

    No doubt there are different opinions as to where the balance lies but at least the official guidance is available to help inform the discussion.

    1. Avatar Raindrops says:

      “…and would be likely to be used by competitors in a particular market to gain a competitive advantage”

      Who do you think is going to gain a competitive advantage over BT? NOBODY it thus fails that criteria.
      Unless stupidly you think that someone elses roll out (INSERT any company you wish) is suddenly going to reach more people than BTs its unlikely to have any “competitive” advantage.

      I find it highly amusing BT dullards somehow think BT giving any info on their rollout will damage their business yet every other provider SOME right down to street level in some cases are more than happy to point out where they are going to roll out their product.

      Dunno what i expected other than a brain dead attempt from you to argue again though.

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