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UK Gov Confirm £129m Clawback Reinvestment to Boost Broadband

Thursday, Jul 30th, 2015 (9:25 am) - Score 1,993

The Government’s Broadband Delivery UK project, which is predominantly working with BT to deploy superfast “fibre broadband” (FTTC/P) services to 95% of the United Kingdom by 2017/18, has confirmed that the take-up rate of their roll-out has exceeded the forecast and as a result they’ve activated their clawback mechanism to reinvest up to £129m.

Understanding take-up is important because most of the related BDUK contracts have a clawback mechanism, which means that take-up beyond 20% could trigger a return of some of the original investment and that can then be used to extend coverage or improve service performance.

Anybody who read our report on BT’s latest quarterly results this morning (here) will already know that the operator’s FTTC/P network, which covers 80% of the UK, has now delivered around 4.6 million connections (roughly 20% of those passed).

BT said this “means we have now achieved our original fibre business case take-up assumption” and as a result they increased their “base-case assumption to 28% penetration, with 30% in [BDUK] areas.”

At this point it’s worth noting that BDUK has always appeared to have a surprisingly low assumption of take-up. Oxera’s report in May 2015 found that, as of Q2 2014/15, overall take-up by premises passed as a result of the scheme was 8.2% compared with BDUK’s expected take-up of 1.8%. Meanwhile the general roll-out progress has kept to target (here).

The question thus becomes, what impact might this have upon BDUK projects and their associated clawback mechanism? Thankfully BDUK has been quick to respond and provide us with an answer, which states that clawback is being activated sooner than originally predicted and should result in BT handing back up to £129m for an expanded roll-out.

John Whittingdale, DCMS Secretary of State, said:

It’s fantastic to see that the rollout of superfast broadband is delivering for customers and for the taxpayer. The Government was clear from the start that as levels of people taking up superfast broadband went beyond our expectations in areas where we invested public money, BT would reimburse the taxpayer for reinvesting into further coverage across the UK. This now means that BT will be providing up to £129m cashback for some of the most hard to reach areas.

Our £1.7bn superfast broadband programme is on track to reach at least 95 per cent of the UK by 2017, and it is great to see homes and businesses making the most of everything that superfast speeds have to offer.”

Gavin Patterson, CEO of BT, said:

Seven years ago, in the depths of recession, we embarked on our multi-billion pound fibre investment to bring faster broadband speeds to the UK.

BT’s fibre network is accessible to more than 23 million premises. Four out of five UK homes and businesses can access it and 4.6m are now connected. We’ve hit our original take-up assumption and have rolled out ahead of target and on budget. This is a real success story for the UK.

We are delighted to be able to share that success by making up to £129m available to extend the roll-out to more BDUK homes and businesses, earlier than planned and at no extra cost to the taxpayer.

BT will work with local bodies over the coming months to identify where these funds can be provided early to enable the local bodies to invest in increased fibre coverage sooner than would previously have been the case.”

So it’s good news, although BT’s separate financial results also added that it would “still be many years before we recover our investment“. Elsewhere you can see a break-down of uptake in BDUK areas using the data in our May 2015 report (here), which shows that quite a few areas are now beyond 20% (Rutland, Herefordshire and Gloucestershire, Northamptonshire, Surrey etc.).

The big question now is how far will this reinvestment take us? The figure of £129m might sound like a lot, but connecting those in the most digitally isolated or slowspot areas (both urban and rural alike) can often be significantly more expensive.

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 X (Twitter), Mastodon, Facebook and .
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