UPDATE3 BT’s Broadband Rollout Deal for Devon and Somerset Collapses

The second round of contracts for the Government’s Superfast Extension Programme (SEP), which is designed to push UK coverage of superfast broadband (24Mbps+) services from 90% in early 2016 to 95% by the end of 2017, has in some cases struggled to reach a deal with BT and the latest contract to fall foul is for Devon and Somerset in England.

The original £94m Connecting Devon and Somerset contract is already working with BT to make “superfast broadband” speeds available to over 90% of local homes and businesses by the end of 2016, although more recently another £22.75m had also been allocated by the Broadband Delivery UK programme for a second (SEP) contract.

The new contract aimed to push the local coverage closer to the 95% goal and thus help with the councils medium-term strategy of achieving 100% coverage by 2020. But in the end the total public funding for this ended up being smaller than planned (£35m) because the council had struggled to find enough match-funding due to local budget cuts.

At this point it’s worth noting that the original plan was for the second contract to form part of an open market tender, although BT said they wouldn’t bid on such a deal and this effectively forced the local authorities back to a BDUK-based framework (here and here).

But tonight we learn that the local CDS project has been “unable to secure a value for money deal” and thus BT will not be awarded the public-funded SEP contract because their “best offer” was not able to reach the contract’s required coverage target of 95%. Furthermore CDS stated that BT’s offer was “high risk” and “does not meet the public value for money standards required under Section 151 of the Local Government Act.” Ouch.

David Hall, Cabinet Member for Somerset County Council, said:

“This is a huge disappointment for us. BT have let the County Councils down, they have also let the Connecting Devon and Somerset Partnership down, and worst of all they have let residents, communities and businesses in Somerset and Devon down. We have a duty to seek best value for all our residents and their tender for the next phase of the programme was just not up to scratch.

We are actually aware of the importance of Superfast Broadband for all our residents but we also needed to make sure we got value for money on behalf of our taxpayers. In taking this action we have acted in the best interests of those who live and run businesses in the region and we will now do everything we can to minimise the delay this causes to the programme. CDS will issue more details once timescales for a new procurement are confirmed. CDS will continue to work with BT on the delivery of phase one of the programme to meet the Government’s target of 90% coverage by the end of 2016.”

Andrew Leadbetter, Cabinet Member for Devon County Council, said:

“I feel let down by BT and their lack of ambition, as well as their unwillingness to negotiate a good deal for the residents and businesses of Devon and Somerset! What they were offering did not represent good value for money and would not have addressed the issues of providing universal provision.

I am only too well aware of how important good broadband connections are to our rural businesses and residents. But we’re committed to delivering value for money for our residents in everything we do. In all conscience we couldn’t sign up to this new deal because it just didn’t deliver. We are, however, still on track through the first phase of the project. We will now go to an open procurement process without delay. I am determined that this should be done as quickly as possible.”

The situation will no doubt fuel growing question marks over whether or not BT is truly paying their fair share towards helping to support such projects, with related public contributions (£) often seeming to dwarf BT’s own allocations for the second round of BDUK contracts.

The situation also somewhat highlights the problem with having a single primary / dominant infrastructure supplier, which in turn reflects the UK’s current regulatory model and the way in which much of the underlying telecoms infrastructure outside of urban areas is still broadly dominated by BT.

On the flip side BT are a commercial operator and forcing them to do something that doesn’t work in their interests was always going to create conflict, especially when it comes to deploying into expensive rural areas where gaining a return on such investment can be much more challenging due to the smaller population sizes.

The CDS project is one of the single largest in the whole Broadband Delivery UK programme and as such any failure to reach a deal here may have an impact on the national target. Today’s situation may also go someway to explaining why so many MPs in the South West of England have setup a new All-Party Parliamentary Group to review the BDUK programme (here).

So what next?

Unsurprisingly CDS has been left with little choice but to return their SEP contract to an open market tender. But of course finding any alternative suppliers that can work at this sort of scale and investment will be rather challenging.

In some areas we have seen Gigaclear pick-up the baton, but they’d surely struggle to match fund with a project of this size and even if they could then the coverage challenge of pushing FTTH/P to 95% would be extremely tough and might well fall short. Meanwhile Virgin Media are only interested in the more lucrative urban areas, which leaves CDS in somewhat of a pickle.

One small bit of good news is that the a new contract for the Exmoor and Dartmoor national parks, which was earlier this year able to proceed as an open tender, has not been affected and the results of that are due to be announced next week.

UPDATE 10:33pm

Several hours after issuing the update CDS has now attempted to recall their press release. We are seeking clarity as it’s a bit late to pull the news without explanation, especially in light of how specific and detailed it all is. We hope to update again, ideally with a comment from BT, in the not too distant future. But for now it’s Friday night = relaxing beer.

UPDATE 10:47pm

Apparently the recall only relates to incorrect contact details in the PR and the above content is thus unchanged. Back to that beer.

UPDATE 27th June 2015 (6am)

It came in a little too late last night, but a spokesperson for BT has stressed that they’re still committed to making “high-speed fibre broadband” as widely available as possible and spoke of being similarly “disappointed” that they had been unable to reach agreement on the contract.

A BT Spokesperson said:

“BT is committed to making high-speed fibre broadband as widely available as possible and we are disappointed that we have not yet been able to reach agreement on the next phase of the Connecting Devon and Somerset programme. We believe we have made the best possible offer to take superfast broadband coverage beyond the current target of around 90 per cent by the end of next year, taking into account the challenging and remote nature of some locations in the two counties.

Our offer would mean that an additional 34,400 households and businesses in the two counties would have access to superfast broadband by the middle of 2020. A huge engineering operation, would be required, including the laying of thousands of kilometres of fibre optic cable and the installation of over 1000 fibre broadband cabinets and other structures. It is estimated that it would take more than 15 years for BT to get a return on its investment.

Our work with superfast broadband partnerships around the country has shown that when we make a commitment we stick to it and we have successfully agreed extension contracts with dozens of partnerships. We would very much welcome working with Connecting Devon and Somerset and making another substantial investment to further extend superfast broadband coverage, but of course any agreement has to be based on what can realistically be achieved. We will continue to work to try to find a solution.”

At present the only certainty is that any deal for the CDS extension project will be very delayed as the procurement process has had to start all over again.

UPDATE 27th June 2015 (7:34am)

The Government’s Department for Culture, Media & Sport (DCMS), which oversees BDUK, has now also responded to our request for comment and added that they too were disappointed in the news.

A DCMS Spokesperson told ISPreview.co.uk:

“The Government’s nationwide rollout of superfast broadband is now reaching 40,000 homes and businesses every week and is on track to reach 95 per cent of the UK by 2017.

Procurement is managed by Local Authorities and whilst it is disappointing that an agreement has not yet been reached, Government will continue to work with all parties involved to ensure any delay to the project is minimised.”

UPDATE 30th June 2015

The CDS project has updated their website with a more detailed explanation (here), which interestingly notes that BT was “unable to commit to achieving the target of 95% superfast broadband coverage by the end of 2017. In addition, BT could not give us any reassurances that the 95% target could be reached by 2021/22.”

Otherwise the update doesn’t add much new to the debate.