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The Light at the End of Shropshire’s BDUK Broadband Funding Woes

Thursday, December 11th, 2014 (12:19 pm) - Score 732

A new report from the Shropshire County Council (SCC), which examines the various options available for providing “fibre broadband” to those areas that aren’t currently projected to received it, has shown that the local authority is still struggling to match the Government’s £11.38m Phase 2 Broadband Delivery UK (BDUK) funding.

The current programme, which is valued at £26m, aims to ensure that BT’s “fibre broadband” (FTTC/P) network can cover 93% of local premises by the end of Spring 2016 (sadly only 87% will actually get “superfast” 24Mbps+ speeds) and this part of the project is already fully funded (note: Telford & Wrekin has its own plan (here) and is excluded).

In addition, take-up of the new connectivity in Broadband Delivery UK assisted areas under Shropshire’s scheme with BT is currently understood to be running at around 8% (here) and over 20,000 extra premises have already been upgraded.

At the start of this year the Government allocated another £11.28m to the area, which is intended to help ensure that 95% of the county can access superfast broadband speeds by 2017. Unfortunately Shropshire, which is buckling under the latest round of cuts in public spending, has struggled since earlier this year to find match-funding for the so-called Superfast Extension Programme (here and here).

The report predicts that some 28,500 premises will be left un-served by superfast broadband when the current project (Phase 1) finishes in 2016. This includes 13,000 premises that are deemed as ‘at risk’ of not being delivered by existing providers as part of their commercial plans. The intention is currently to exclude these 13,000 premises from any procurement in Phase 2 (i.e. the tender will seek a solution for the remaining 15,500).

The good news is that BDUK have confirmed they will support Shropshire Council in a Phase 2 procurement regardless of its ability to initially match the funds, albeit “on the understanding that the Council will continue to look for match funding to support actual expenditure.”

Shropshire’s BDUK Financial Implications

BDUK have confirmed they will support Shropshire Council in a Phase 2 procurement regardless of its ability to initially match funds on the understanding that the Council will continue to look for match funding to support actual expenditure. Any risk to the Authority is mitigated given that the Council will need to agree grant conditions prior to entering into any contract with a supplier. The costs associated with the proposed procurement exercise consist of Officer time and other expenses and have been budgeted for within the existing Revenue budget identified for the Broadband initiative.

Match funding may become available from the EU and Marches LEP funding sources in future. Details of any allocations are currently unclear and will remain uncertain until perhaps early 2015. Connecting Shropshire has projected a potential match funding figure of £9.7m to support a further procurement phase, whether as part of a BDUK Phase 2, or later as a Phase 3 project. Potential match funding sources include the LEP Local Growth Fund 2 of £7.5m (2016/17) and EU notional Funding 2014-20 of £2.2m (2015/23)

Revenue funding is currently not in place to provide a programme management office beyond current revenue commitments to September 2016, when the current programme is scheduled to complete and close. The estimated future cost is £0.240m and a new budget will need to be put in place from October 2016 should this initiative continue to be prioritised. Over the coming months work will be undertaken to both confirm the required budget and identify potential funding sources. There is a base budget allocation of £0.104m per annum, leaving a funding gap of £0.136m yet to be identified.

The report also examines a number of different approaches, from continuing with the existing deployment approach to completely abandoning their future plans. The latter is largely ruled out, although it’s interesting to note the council’s position on continued use of BT’s up to 80Mbps FTTC and 330MBps FTTP technologies. Simply, the council believes they won’t offer “value for money“.

Shropshire’s View of FTTC/P Connectivity for Phase 2/3

Owing to the network topology and geography in Shropshire the existing framework technologies, within the current Suppliers solution will not currently offer value for money:

• Fibre to the Cabinet – in the majority of cases this technology has been fully exploited. Upgrading the remaining cabinets in the Council area will not provide sufficient premises with a good uplift in broadband speed because the majority of premises are a long way from their nearest cabinet. There is however some opportunities to build FTTC structures that will give ‘good uplift speeds’ at a reasonable cost (1,000-2,000 premises).

• Fibre to the Premises – within the current contract BT will be building a number of FTTP structures. The cost of building these structures can be expensive in rural areas where premises are dispersed. The average cost of FTTP for Phase 2 has been estimated at £2,000 per premise which does not offer good value for money.

Instead the council appears to be banking on alternatives and specifically states that “the procurement using the BDUK framework would need to include assurances that new technology (i.e. Fibre to the Remote Node – FTTRN) would be deployed in order that value for money can be achieved“. However BT’s FTTrN solution, which puts cheaper mini cabinets (remote nodes) either underground or on top of telegraph poles, is still in the early testing phase and as such the final economics remain uncertain.

The council concludes by saying that there remains “significant risk” associated to procuring outside of the existing BDUK framework and not meeting the June 2015 deadline. “However, unless new technologies can be assured within a Phase 2 procurement Shropshire Council would not be able to justify using the framework,” said the report.

Looking ahead the council suggests that the balance of grant funds could be subsequently deferred and used in a further Phase 3 procurement, using additional match funds once these are secured. “This would provide the most pragmatic, flexible and expedient solution,” says the report.

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Mark Jackson
By Mark Jackson
Mark is a professional technology writer, IT consultant and computer engineer from Dorset (England), he also founded ISPreview in 1999 and enjoys analysing the latest telecoms and broadband developments. Find me on Twitter, , Facebook and Linkedin.
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12 Responses
  1. Avatar Steven Bridgett says:

    Why don’t they borrow against the estimated claw back? Surely that A,) Gives the council several years breathing space in terms of not having to find the money from within it’s own budgets and B,) if take up over the next 3 years crosses certain thresholds they will be looking to get the money back from BT which would pay off the upfront loan borrowed against the claw back to match fund phase 2.

  2. Avatar DTMark says:

    OK, so VDSL isn’t the right tech option.

    You have a quote from BT for FTTP.

    How much are the quotes from Gigaclear, et al?

    How much will wireless cost for those outlying communities?

    This would all have been known years ago, it cannot just be coming to light now, unless a load of properties lifted themselves up and walked somewhere else like something out of The Simpsons.

  3. Avatar GNewton says:

    “However, unless new technologies can be assured within a Phase 2 procurement Shropshire Council would not be able to justify using the framework”

    Is this a first sign that a Council is now finally starting to think outside the box?

    Hope the BDUK will be scrapped, the sooner, the better!

    1. Being based in Shropshire ourselves and also working with contacts at many of the Local Authorities, including Shropshire, I can state quite clearly on the record that Shropshire’s approach and professionalism is way ahead of many other councils.

      We had our doubts at the start, but, respect where it’s due, Shropshire’s setup has been bright, proactive and future thinking.

    2. Avatar DTMark says:

      “Upgrading the remaining cabinets in the Council area will not provide sufficient premises with a good uplift in broadband speed because the majority of premises are a long way from their nearest cabinet”

      Where’s New_Londoner gone? 😉

      What puzzles me most is that this would have been known from the outset.

      There’s a budget and set of objectives.

      Why have they started to spend the money without being sure that the objectives can be met?

      If you take an area served by a cabinet where 50% of the users can get a VDSL service and the other 50% are too far away, so you have to build a second network, which then overlaps with the first, why not just build one network with the technical capability to service all of the users?

      As I’ve always said, VDSL is a good option for clustered properties. But the idea that one size fits all is madness. Street by street, you’d need to plan the networks needed to deliver the objectives. At the start, necessarily.

      You don’t just partner with someone who then rolls out their preferred technology some of which might overlap with the project objectives, time runs along, the money runs out, and the objectives are shot to pieces; you challenge it up front and tell the government that the BDUK framework simply won’t work and find another way.

      So why is this all coming to light now that money has been spent?

    3. Avatar MikeW says:

      @GNewton

      Obviously phase 1 BDUK isn’t going to be scrapped.

      Even phases 2 and 3 aren’t likely to be scrapped either, even without clear funding matches. But there’s a good chance that at least some of the money won’t go to BT

      It probably depends on the “new technology” to come – which for BT probably relates to FTTRN.

      @DTMark

      The quote relates to the cabinets that won’t have been upgraded in phase 1; like everything, the law of diminishing returns kicks in – either because the cabinet is too small, or where large enough doesn’t have enough properties close enough.

      North Yorkshire are hitting a similar limit at the end of their phases 1 and 2; the “value for money” (that central BDUK requires every council to verify) becomes less certain beyond that, especially if full FTTC nodes have to be used.

      At the last NY council meeting, it became apparent that the FTTRN trial was hitting delays over power; the trial node there ends up being powered in the same way as a full FTTC cab – which doesn’t make FTTRN a cheap-enough solution.

      It seems clear that any use of FTTRN in any county’s SEP project depends on BT (and whoever supplies the FTTRN node; I guess Huawei) coming up with cheap power for it.

  4. Avatar DTMark says:

    So was Ed Vaizey wrong when he declared that we already have the funds to deliver superfast speeds to everyone? Shopshire appear to think so.

  5. Avatar NGA for all says:

    Reducing the commercial footprint by (13000 here- c50-65cabs) is now becoming the norm. This is in breech of clauses 79-80-81 of the state aid measure.

    1. Avatar DTMark says:

      If one private player is guaranteed to receive all or most of the BDUK money, you can’t separate “commercial investment” and “BDUK investment” in any meaningful way.

    2. Avatar fastman2 says:

      DT Mark actually you can as each cab has a decision cirtier on ia any any change to have have been clearly noted and Detailed o just becuase you don think their is i can assure you there is

  6. Avatar NGA for all says:

    I hope they conduct and report on a systematic recocniliation of milestone payments against BT acual invoices less BT verifiable contribution.

    Given £15k was the marginal cost reported in Ashley fo cab, the contingencies ought to be in the 30-40% region.

    1. Avatar fastman2 says:

      NGA FYI ashley needed no spine as the spine went past the village (identified on closer inspection and ability to insert a joint (to access it)– if the spine had no run that would or there was no joint then the cost would have been 3 / 4 x that — i got a community that needd 5.5k worth of spine to get to it — how much you do think thats going to be !!!!!

      just paper economics and no understanding of the design and engineering — remind mean of some of the inferences of ITT’s i havd to respond wantted roll royce solution for skoda pricing (1990’s skodas)

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