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BDUK and BT Push Superfast Broadband to 3.31 Million Extra UK Premises

Thursday, November 12th, 2015 (10:06 am) - Score 1,190

The Government’s Broadband Delivery UK initiative, which is primarily working with BT to make fixed line superfast broadband (24Mbps+) services available to 95% of the United Kingdom by 2017/18, has ended Q3 2015 by confirming that 3,311,843 extra premises have now benefited from the effort.

The programme, which began in 2010 after it became clear that private investment alone would struggle to expand the coverage of related broadband services beyond around 70% of the country (BT and Virgin Media complained that going further was “not commercially viable“), currently consists of two primary phases.

Phase one is supported by £530m worth of state aid and aims to push superfast connectivity to 90% of the UK by 2016 (4.2 million additional premises passed), while phase two added £250m to the pot and targeted 95% coverage by 2017/18. The EU and local authorities have also helped to match fund with this, bringing the total public investment to around £1.7bn.

So far BT has won the lion’s share of related contracts (they’ve often been the only bidder) and predominantly focus on meeting the target by deploying their 40-80Mbps capable Fibre-to-the-Cabinet (FTTC) technology, with a few pockets of ultrafast (330Mbps) Fibre-to-the-Premises (FTTP) and some alternative solutions in niche locations (e.g. FTTrN, FTTB, WTTC).

Broadly speaking the project’s progress has been reasonable, with +406,079 additional premises (coverage) being added in Q3 2015. Put another way, if the current rate of progress continues then we should reach close to the 4 million mark by the of Q1 2016 and then the first 90% goal would be within touching distance (a little later than planned under the original end of 2015 date).

However if the Government wants to keep pace with Europe’s Digital Agenda goal (i.e. 30Mbps for all with 50% subscribed to a 100Mbps+ service) then they’ll still need to achieve universal coverage of superfast broadband by 2020.

Otherwise a breakdown of the latest progress can be found below, which excludes match funding from local authorities, the EU and BT’s own contributions. The premises passed figure only reflects those able to receive superfast speeds of greater than 24Mbps (Megabits).

bduk broadband performance update q3 2015

The figures above are cash based (i.e. when grants are made or budgets transferred). On an accruals basis, which matches costs incurred to the timing of delivery, cumulative BDUK expenditure to end-September 2015 has been estimated as £412,002,461 and that equates to 8,038 premises covered per £million of BDUK expenditure (expenditure is higher for this because the work has been delivered in advance of payment).

It’s worth pointing out that BT has also recently announced plans to bring speeds of up to 300-500Mbps to “most homes” over the next 10 years by rolling out G.fast broadband technology from 2016/17 (here), although this will currently only benefit their commercial footprint and not BDUK areas. Virgin Media have a similar expansion project for their ultrafast cable network (here).

The Government are also imminently expected to announce a new phase three investment (here), which is set to focus on tackling the significantly more expensive and challenging problem of catering for those in the final 5% (i.e. predominantly remote rural areas and a few disadvantaged urban locations). We also expect to get some more details about funding and the new 10Mbps USO pledge (here).

In keeping with this BDUK has been trialling a number of alternative network solutions, such as Satellite and fixed wireless technologies. The Budget 2015 announcement has similarly hinted that a not especially appealing Satellite subsidy could help to cater for the final 1-2% of remote UK rural areas, while the rest would be done via other methods of connectivity.

Funding for phase three could represent a mix of £100m extra from the BBC TV Licence fee after 2017, as well as making use of up to £129m from BT’s Clawback linked reinvestment / savings from phase one / two (here) and the worrying possibility of a tax on broadband ISPs has also been suggested (here).

Overall the progress so far has been reasonable, although both phase two and three will focus on increasingly difficult to reach areas and that could impact the targets as these take longer to reach (BT has hinted that the 95% target could slip into 2018). A number of alternative ISPs, such as Gigaclear, AB Internet and Airband, have also won contracts under phase two and we expect more of this in phase three.

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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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32 Responses
  1. Avatar Steve Jones says:

    I don’t see why a levy on broadband to pay for hard-to-reach areas is worrying (at least if it is explicitly used for that purpose). If an input of public money is considered necessary for social reasons, then a hypothecated tax on BB makes sense. After all, the provision of rural telephone lines has long been cross-subsidised. In effect, those in urban areas pay more for their phone lines than is justified on economic grounds and the excess is used to support the more expensive areas. This is a long-standing practice that also applies for water and electricity connections too and only works where there is a near monopoly.

    In the case of BB there is infrastructure competition in over half the market with LLU competition in something approaching 90% of the market. Internal cross-subsidisation by one company becomes problematical in such a fragmented market. A BB levy corrects this issue by providing a common fund.

    For those that want this to be done out of general government revenue, then there is always the danger it will be subject to cuts due to other priorities (and there are plenty of those). A hypothecated tax gives more certainty, although even those can be subverted as we see with the TV licence fee which is just such a hypothecated tax, as raiding it for BB is not really appropriate for what was always meant for public broadcasting.

    nb. calling it the BBC licence fee is something of a misnomer. It may be that the BBC is the only recipient of funds from it for broadcasting, and they very jealously protect this status. However, it’s perfectly consistent with the terms in which it was set up to be used to finance other public broadcasters albeit the BBC would fight this tooth and nail.

  2. Avatar GNewton says:

    “by rolling out G.fast broadband technology from 2016/17 (here), although this will currently only benefit their commercial footprint and not BDUK areas.”

    Here we go again. BT will cry out for more taxpayer’s money in order to do G.fast in BDUK areas, or the digital gap will widen again.

    1. Avatar TheManStan says:

      It will be interesting to see if BT follow through on this percentage. As the major hurdle for some of “rural” was the long initial fibre run. As that is in place then it should be possible for “dense” rural (compact village) which is already FTTC served to be included for no real significant cost above that of urban/suburban of equivalent topography.

    2. Avatar DTMark says:

      1. It may well cost more to dig up ducting that hasn’t been opened up for 50+ years, such as in rural areas, to get fibre to street level poles. The less densely populated the area, the more poles, the more street level nodes, the higher the cost and especially when considered relative to the ROI (number of properties passed).

      2. The case for “commercial” deployment is weakened or completely removed when there is no competition. This is the case outside cabled areas or those with alt-nets, which are, of course, those with the least choice and limited speeds. The BDUK process has further entrenched this. Therefore:

      3. Anyone who imagines there will be any wide-scale roll out of G.Fast to street level nodes on a commercial basis outside of cabled streets, those with alt-nets and possibly business parks needs their head examined. No such commitment has been made. Rollouts will tend to focus on areas which already have the fastest speeds necessitating the entire BDUK process to be held over again to significantly increase coverage footprint and hit EU targets, because no lessons were learned.

    3. Avatar PeterM says:

      I have zero expectation that we will ever have G.fast in rural West Chiltington. The current layout of the copper would also have to be changed. Many properties are not connected to the closest cabinet, the ducting is in terracotta pipes down tree lined lanes, older properties are connected to one cabinet and newer properties to another in nearby streets.
      In an area of around 20 square miles with just 2,000 lines and with such a low take up of FTTC how could G.fast possibly be justified in the eyes of the politicians.

    4. Avatar fastman says:

      I would expect gfast will be rolled where it commercially viable to do — so not sure what the snipe around business parks and altnets comes from — you invest where you make a return you would assume that gfast would be a premium product so would be targeted at specific areas that meet the primarily high value properties and short copper runs

    5. Avatar DTMark says:

      In what way would it be a premium product in cabled areas? By then, it will probably be “yesterday’s product” and rather slow by comparison unless the nodes are deployed practically to the front door. Virgin may have got around to sorting out their upload speeds by then.

      It would enable BT to regain some customers, but premium product at a premium price, no.

    6. Avatar MikeW says:

      I guess the package speeds enabled by g.fast will remain premium while most subscribers prefer to pay for something lesser.

      VM’s setup makes their ultrafast speeds premium, and most subscribers prefer to be in the bottom tier – and would probably choose something slower if a cheaper option were available.

      Not sure why you persist in believing that BT only chase cabled areas. More than 50% of their commercial rollout didn’t fulfill this myth.

  3. Avatar DTMark says:

    How’s the secondary target of 2Mbps for everyone by the end of this year going?

    How will BDUK penalise the local authorities for failing to deliver?

  4. Avatar nga for all says:

    Misleading. BT have reported £862m in accumulated state receipts for the 17,500 cabinets installed to date. At a minimum we should La+ bduk expenditure. Then we can calculate the overpayments and chase the BT capital due. The £862 is made up of £126m in 13/14, £392m in 14/15 and £103m in Q1 and £64m Q2. No sign of a bt capital contribution.

    1. Avatar TheManStan says:

      Um…

      126+392+103+64 = 685

    2. Avatar nga for all says:

      @themanstan tx q2 is £62 not £64m. It shows that Bt has received more than £38k for each cab the NAO says coats c£25k before BT contribution. Simple to fix but should not be glossed over.
      1

    3. Avatar TheManStan says:

      You should take off the current deferred amount of £157M, as that is classified as unspent returned.

    4. Where is the 17,500 installed cabinets figure from?

    5. Avatar NGA for all says:

      @stantheman – £129m of the £157m is clawback on takeup accoding to Tony Chanmugam, due to the assumption changes in the model. I think the £27m might be the start of the capital contribution or it could be an allowance for repaying overcharges where proxy costs were used.

      North Yorks at £177 per premise passed suggests receipts of >£33k a cabinet, while in Wales the Audit Wales recorded £234 per premise passed o circa -£44k receipts. That is a lot of credit to be repaid. This is before BT pay a capital contribution of c£65-£75 per premise passed. The gain share is on top.

      This is simple enough to fix and allows a more ambitious rollout.

  5. Avatar Steve Jones says:

    @NGA

    You are NOT going to get the full cost of installing a cabinet, just the net cost to BDUK. The reason is simple. The full cost is commercially sensitive as it would give away obvious information on procurement, internal and external labour and a host of other things to competitors. That was recognised by the NAO who used independent benchmark figures for a hypothetical “efficient operator”.

    If BDUK had been bid as a fixed price contract, rather than a best possible internal price model, then it would be different (again noted by the NAO).

    It is possible to make some estimates by looking at total BT capex during the commercial roll-out (the vast majority of which has finished) and the capex net of BDUK funding now. Given the latest figures show and increase in capex it is surely reasonable to assume (in the light of the very limited commercial rollout) that the BT capex on BDUK is broadly comparable to what was being spent during the commercial roll out.

    nb. the NAO report also noted that the initial BDUK cabinet installs would be some of the more cost effective to install and that average costs were likely to go up as more difficult areas are enabled.

    1. Avatar TheManStan says:

      Actually Steve the bid cost from BT is the full capital cost, but the exclusions from the costs

      FOI to NAO (The Superfast (Rural) Broadband Programme: update ) on bid costs from BT resulted in this response:

      “In response to your query, I can confirm that the reference to “bid costs” in the memorandum was to the full capital cost of each cabinet quoted by BT, rather than the public sector contribution towards the cost of the cabinet.”

      But also they said:

      “It doesn’t include improvements to backhaul / core network, infill or the capital costs associated with connecting a premise to a cabinet.”

      Why say anything about this if they are not allowable costs???

      Which to me means costs cannot be accounted for simply by totting up cabinets and multiplying by the average cabinet costs.

      Which is made plain by the fact that the BT receives more than £28,900 2013 average bid cost submitted per cabinet.

    2. Avatar Steve Jones says:

      @TheManStan

      This seems to be directly contradictory to the NAO BDUK report which specifically states it is a gap funding model.

      Programme-update.pdf

      “Both phases 1 and 2 use a gap funding model, where the gap is the public contribution required to supplement a supplier’s investment in broadband infrastructure to make a project commercially viable.”

      page 9

      https://www.nao.org.uk/wp-content/uploads/2015/01/The-Superfast-Rural-Broadband-Programme-update.pdf

      Looking at the earlier report (page 33), there is a huge difference in the bid costs per cabinet according to area. There’s also a breakdown that shows no less than 23% of the anticipated costs were operational (which gap funding also covers).

      Page 33

      https://www.nao.org.uk/wp-content/uploads/2013/07/10177-001-Rural-Broadband_HC-535.pdf

      It also says that street cabinet enablement costs were only 36% of the whole

      The gap funding model was never just as simple as covering capital in the bid costs.

    3. Avatar themanstan says:

      Unfortunately, I think that the NAO document with the breakdown of subsidies will be ignored as it does not fit with the perceived injustices…

    4. Avatar TheManStan says:

      Did you look at p34, right hand column?

    5. Avatar NGA for all says:

      @Steve Opeational costs are excluded from gap funding. Operational costs are the difference between the £356m capital contribution and the £1bn BT offered to match. The inclusion of operational costs was part of the BT gambit to confuse. Do read SA336671. The Cartesian report for Ofcom on cost attribution is also useful.

      @themanstand – some clarification is needed as the second NAO report does list core enablement and establishing spine and backhaul costs. The two NAO report is clear and subject to the usual Maxwellisation process.

      @andrew – 17,500 is estimated two ways, a physical count of the announcements being made and a simple 3.31m premises passed /190 premises per cabinet. It is indicative. It is useful because when added to the 50,000 commercial cabs, it provides a measure of progess and the challenge ahead in terms of the number of network elements that still needing to be upgraded.

      The poject is successful, it can be much more successful, what’s the problem?

    6. Avatar Gadget says:

      @NGA – I would consider taking into account operational costs as an important part of the assessment of commercial viability rather than a gambit. You don’t buy a car without considering the taxes, repairs, insurance and fuel costs.

    7. Avatar TheManStan says:

      Having gone through SA336671 there is no exclusion of operating costs, unless I’ve missed something.

      In fact

      (23)
      “Form of support: The BDUK programme funding will be provided for the most part on
      the basis of ‘investment gap funding’, in which case the state aid granting authority awards direct monetary grants to broadband investors to build, MANAGE and COMMERCIALLY EXPLOIT a broadband network”

      Critical words are in bold, these are operational cost related items…

    8. Avatar NGA for all says:

      @Gadget @themanstan I have gone through Audit Scotland which separates out operational costs and the capital due. So this is allowed for in full. I have double checked within the Ofcom/Cartesian extensive work on cost apportionment for all the CL code relating to FTTC service delivery costs, development, maintenance and you cannot reach anything close the numbers needed to reconcile. You can extract a total of 12 pages of material on NGA cost apportionment from the 650 available across the two reports. There is inconsistent redacting between the Cartesian report and Ofcom’s summary to permit more to emerge than you would expect.
      Ofcom put particular focus on NGA as in 2016 much will be reviewed.

    9. Avatar TheManStan says:

      From EU guidelines on State Aid document.

      (11) Undertaking: State measures supporting broadband investments usually address the exercise of an economic activity, such as the construction, OPERATION and granting of access to broadband infrastructure or enabling the provision of connectivity to end-users.

      Again in bold, if operational costs could not be included, the operation would be in a separate sentence or paragraph stating it’s exclusion.

    10. Avatar NGA for all says:

      @themanstan – at best in the context of calculating BT’s capital contribution this is a distraction. Audit Scotland partially deals with the issue I believe. If you go that route you end up attempting to reconcile £10 per customer passed for 10 years with a fraction of those costs being reported in the CL codes for FTTC service delivery, maintenance etc. You end up digging a bigger hole. That hole does not need to be opened. I did not finish that piece of analysis as the gap between the two (actual ops cost v those modelled for BDUK) was so large. The gap becomes large as ops costs were inflated like eveything else as they were stated as a product of an inflated capital cost. You can add complexity if you want but it widens the gap the modelled and the emerging reality based on actuals. E.g. If the OPs were 23% of an inflated cost, and the actual cost is at least 38% less than modelled, the abolute amount in money terms to fix increases. You better off not drawing attention to it as it has no direct bearing on the discussion on absolute cost and BT’s contribution to that cost. The model can be ammended with the actuals without needing to reveal the change.

    11. Avatar TheManStan says:

      It seems clear that both EU and UK state aid rules have no explicit exclusion policy for operational and other costs… so the proof will be at the pudding when BDUK phase 1 is complete and the invoice deadline appears will BT have had payments equal to or less than BDUK/EU/LOCALgov funding. A important note will be where clawback has been acheived, then operational costs will have stopped being invoiced as commercial sustainability has been achieved.

      As an aside the £28.9k BT cabinet average (which gets used a lot) is only from 18 bids not all 43, so in reality the use of that figure is not useful to quote, you would need to know the average bid cost from all 43 for the BT average cost to be valid data point.

    12. Avatar NGA for all says:

      @themanstan – you are billing operational costs? I know there were in the proxy costs but not included in BDUK allowed actuals. If you do that then it is impossible for BT to be paying its capital contribution.
      On what basis are operational costs calculated? Is this from 2012 BDUK modelled costs?

      The proof is already in BT accounts – £682m of state aid for c17,500 cabinets.
      This is more than £240m above the estimated costs (NAO II chp3 numbers) to date and without BT’s capital contibution of £230m. The clawback of £129m needs to be divided across all c4.1m phase 1 premises including those yet to be passed? The clawback is on top of the capital due.

      You cannot wait 7 years to fix this.

  6. Avatar fastman says:

    theman too true

    1. Avatar NGA for all says:

      You insight would be most welcome on the following.
      State aid recipts to BT to Sept 2015 – £682m -recored quarterly.
      Installed cabinets to date – c17,500 for 3.31m
      Average total billed to state per cabinet = £38.9k (a little wip, and <1% FTTP)
      Average total cost identified by NAO before BT capital contribution – c£25k
      Expected BT capital contribution to Sept 2015 – £230m (a proportion of the £356m)
      If we add £230m to £682m – you are saying tva cost per cab/fibre path is £52k each before operational costs?
      Your MD at PAC would not acknowledge a number above £28,900. The £230m would suggest BT pays the first £13k capital on average so far but this will fall the further we go. Clawback is on top.

      What is your perspective? All these numbers are in the public domain so you should be able to comment.

  7. Avatar fastman says:

    NGA not sure who that was directed at it

  8. Avatar Hantslady says:

    The whole thing is a complete farce. They may have connected millions to the new network but I wonder how many are actually “benefitting”?

    We run a business in a rural location 1.3k from the nearest “tag” pole which is 1.5k from the fibre cabinet. The cabinet went live about 6 weeks ago and is already over capacity with the result that we not only get slower broadband than we did on ADSL we also have to compete with residential users reducing the speed to the point that we sometimes get nothing at all. Considering we are paying at least double what residential customers pay, why should we be competing with them? I thought the whole point was to put rural businesses on a more level footing not to penalise them by making them compete with residential users on inadequate sized cabinets. Before moving to “faster” (and more expensive) broadband we got a very stable download speed of 6Mbs on ADSL. Now we get 4.5Mbs if we are lucky. The Openreach engineer has suggested that we move back to ADSL!

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