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UPD3 BT Elect “not to participate” in Herefordshire Fibre Broadband Extension

Tuesday, December 8th, 2015 (7:28 am) - Score 1,110

The Herefordshire Council has said that BT has decided “not to participate” in Stage 3 of their tender to deploy superfast broadband connectivity to the remaining parts of the county, which means that the local authority may have to depend upon alternative network (altnet) providers.

At this point it’s worth noting that the related tender forms one part of the joint Fastershire project, which currently aims to make BT’s “fibre broadband” (FTTC/P) network available to around 85-90% of premises in Herefordshire and Gloucestershire by December 2016 (aka – “Stage 2“).

As per usual the expected reach of “superfast” speeds requires some clarification. Using BT’s Best and Final Offer (BAFO), on which the first contract was based, 77.8% of premises in the intervention area for Herefordshire will be able to access download speeds of 30Mbps+ (i.e. 35,424 out of the 45,532 premises within the relevant area).

On top of that the longer term aspiration for Fastershire has always been to make “superfast” speeds available to 100% by 2018. In keeping with this the Gloucestershire side of the project (excluding the separate South Gloucestershire scheme with Wiltshire) has already signed a contract with Gigaclear to bring 1Gbps FTTP broadband to 6,495 additional premises in the Cotswolds area of the county by May 2017 (here).

Meanwhile questions have arisen over Herefordshire’s future direction beyond the 90% goal, particularly with most local authorities having long since signed extension deals with BT under the Broadband Delivery UK project’s Superfast Extension Scheme (this aims to push superfast broadband to 95% of the UK by 2017/18).

However a recent council meeting document, which was forwarded to us by a representative of the local Cheltenham 151 campaign, confirms that Herefordshire has now “revised” their strategy because “a number of parameters have changed the landscape“, including “BT’s decision not to participate in Stage 3 of [the] 2014 strategy.”

herefordshire_uk_revised_broadband_plan_dec_2015

The council stresses that the “overarching objective of the strategy remains the same” (i.e. 100% “superfast broadband” coverage by the end of 2018), although there will need to be a greater focus on altnet ISPs due to BT’s decision not to participate in the next stage.

The Revised Fastershire Broadband Strategy (Document Quote)

Though the overarching objective of the strategy remains the same, namely to reach all those who need it with superfast broadband by the end of 2018, a number of parameters have changed the landscape resulting in the need for a revision. These include:

* As part of the next phase delivery Fastershire became the first area to award a major BDUK funded contract to an alternative provider based on a lot within the Cotswolds.

* This process successfully tested the lot based approach and revealed a change in the market since 2012 with an emergence of companies providing services and technology that are specifically designed for rural delivery.

* The exercise also showed that the need to define consolidated areas was not as critical as had been imagined.

* As the contract with BT nears completion there is a greater understanding of the premises that still require an increase in broadband speeds.

* Additional funding has been secured for Gloucestershire from the South West Superfast Ultra-Fast fund.

* Greater understanding of funding potential and confirmation of funding via the local enterprise partnership.

* BT’s decision not to participate in Stage 3 of 2014 strategy.

ISPreview.co.uk reached out to BT for a comment yesterday, although so far the only reply has been one of silence. However the situation in Devon + Somerset (here) and now Herefordshire shows that BT can’t always be relied upon to invest in the most economically challenging of areas, where the prospect of a viable return on their investment is increasingly difficult to find and political time-scales could be difficult to meet.

Elsewhere BDUK have “ring-fenced maximum capital funds” of up to £5.52m for Herefordshire’s future network deployment, which the council will have to match. In keeping with this the council has already secured an approved allocation from the Local Enterprise Partnership of £1.67m and is seeking additional funds from the EU, as well as other sources.

So far £1m has been included in the capital programme proposals for approval by Council on 18th December 2015 and a further £2.85m of match funding is planned to be identified as the programme progresses, with the opportunity to make a case for future funds in subsequent capital programmes. These will be based on a case made for each lot once bids are received, with a value for money test applied.

Separately, the Government has made additional funds available to the South West region for “ultrafast” deployment, as a member of that region Gloucestershire has been allocated £2m which requires match-funding. This has been combined with £0.52m of funds previously allocated to Herefordshire from BDUK as a result of a bid for Rural Community Broadband. As a consequence public funds are anticipated to be available for Lot 2 of £4.52m (see above), subject to approval by Gloucestershire County Council in December 2015.

The importance of all this to the local economy is not to be underestimated. A recent Economic Impact Assessment suggested that Herefordshire’s current contract could deliver a Gross Value Added (GVA) uplift of £13m per annum and a cumulative GVA uplift of £120m over ten years, which might rise to £134m if 100% coverage of fibre broadband is achieved.

The situation represents a golden opportunity for altnet ISPs, although equally it’s also one that risk averse councils may not relish (see the recent example of Fibre GarDen). Alternative providers that want to compete will have to up their game and scale, particularly as we’re expecting to see more situations like this as the Government switches its focus towards upgrading the final 5%.

UPDATE 11:16am

We are still awaiting an official line from BT, although unofficially the operator appears to be saying that they have not yet taken a decision on the matter because the council have not started the formal process for the next phase (partly because of the on-going EU delay over state aid clearance). Clearly this appears to conflict with Herefordshire’s position in the recent council meeting.

UPDATE 1:58pm

The official line is as follows.

A BT Spokesperson told ISPreview.co.uk:

We are committed to taking fibre broadband to as many homes and businesses in Herefordshire and Gloucestershire as we can, and our existing BDUK project there is progressing well.

We are constantly exploring the options to extend coverage further, but there has been no formal public consultation on a potential contract extension.”

We are also seeking more insight from the council on why they’re claiming that BT has chosen not to participate, while BT seems to be saying that they haven’t been asked.. albeit “formally“.

It is worth noting that Herefordshire did run an Open Market Review process in 2014, which was partly conducted as a consultation to help establish which areas would still need assistance when the first contract completed and there have been a number of related council meetings on the subject.

UPDATE 9th Dec 2015

A spokesperson for Herefordshire council told ISPreview.co.uk, “The Cabinet report discussed by Herefordshire Council refers to BT not participating in Stage 3 of the original broadband strategy. This could have resulted in a contract extension to BT’s existing deployment in Herefordshire and Gloucestershire using part of the SEP funding. For that, and several other reasons listed in the report, Fastershire will now proceed through a series of open procurements starting in early 2016. BT will remain eligible to bid for any of these new procurements.

Sadly this still doesn’t answer the question of why BT chose not to participate in the original stage 3, although as above BT suggests that they weren’t asked to do so.

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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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23 Responses
  1. Avatar Captain.Cretin says:

    Various people have been moaning for years that BT were getting all the contracts, so now they should all be happy.

    1. Avatar FibreFred says:

      Indeed I think things will get interesting now because we are seeing BT saying it’s not viable in a few areas and I’m sure they’ll be more.

      What happens if altnets say the same? Maybe that is problem after all these areas don’t add up financially and it’s not all BT’s fault although I’m sure I’ve mentioned that

    2. Mark Jackson Mark Jackson says:

      A bigger issue might be that not all altnets have the same match-funding flexibility as some of the most established players, such as Gigaclear. In that situation nearly all of the funding would have to come from public sources, which creates more of a risk for the councils.

    3. Avatar gerarda says:

      A still bigger issue is that because BT were allowed to cherry pick the extent of the coverage in the first phases what is left is so fragmented that it will be much more expensive to complete. I suspect we will be consigned to be on the wrong side of an ever deepening digital divide for the foreseeable future

    4. Avatar FibreFred says:

      Hmmm, is it cherry picking tho? To me its two sets of people getting together, throwing their money in the pot and seeing what they can do with it to get the most coverage.

      The decision won’t be BT exclusive will it, its a joint plan?

    5. Avatar FibreFred says:

      But yes.. I do agree with what you’ve said and Mark’s good point as well.

      These other areas could be very patchy pockets of users, not good 😐

  2. Avatar Patrick Cosgrove says:

    Cherry picking has certainly created fragmented maps, with the scatteted ‘crumbs’ more to the fringes of administrative areas, especially where county towns (such as Hereford) are geographically central. More attractive business cases could be constructed if adjacent local authorities collaborated on cross- boundary contracting. With BDUK now scratching its heads on how to make the best of the new state aid regs, that provides a bit of breathing space to think more imaginatively. There’s never been any coterminosity between local authorities’ geography and BT’s infrastructure which partly explains the mess many of us on the rural fringes are in. Near to where I live in South Shropshire one of the very few FTTP lines (Rcbf funded) stops dead at the county boundary, but those on the other side on sub 2Mb are on the same STD code.

  3. Avatar NGA for all says:

    So what happens BT matched funding and the clawback? BT’s BAFO for overlaying fibre on an existing network is more expensive than an alternative?

  4. Avatar Matt says:

    In the updated strategy document Fastershire are planning on using wireless ISPs to replace BT. This may make sense in rural areas, but not in areas like ours.

    Openreach quoted us £10k to provide us with a FTTC cabinet, which works out at £177 per property. The footnote on page 9 of the Fastershire strategy document says they’re assuming “an average subsidy per premise passed of £1,000 for Herefordshire and £750 for Gloucestershire” for the wireless option. Paying Openreach would be cheaper, give us a better choice of suppliers and be future proof. Instead we’re going to be left with a wireless solution in a built up area. There’s no guarantee we’ll even be covered, as they’re still only planning on covering 65% of the properties eligible in stage 3.

    Why would BT choose not to participate? Revenge for losing out to Gigaclear in the previous stage, or the County Council being unreasonable?

    1. Avatar NGA for all says:

      £10k makes sense, but the rates under BDUK do not. BT has gleaned £694m for c17,500 cabinets to September 2015. Fastershire + BDUK subsidies of £35.7m and BT’s offer of £20.9m investment should mean the funding position is strong, given the size of the intervention area.

    2. Avatar FibreFred says:

      Revenge? 🙂

      Money is Money Matt it’s hard to see anyone turning away money for a slice of revenge

    3. Avatar Matt says:

      Which means the Council were unreasonable then?

      Or Openreach don’t have the capacity at the moment to commit to the deadlines the council wanted, but if that’s the case the council have favoured hitting certain dates over selecting the most appropriate solution? Wireless has it’s place, but not in non-rural areas where fixed line solutions are available for cheaper.

      Be interesting to know why BT didn’t participate. Any other theories?

    4. Avatar FibreFred says:

      It could be one of more of those and probably some more.

      Too expensive, very long term ROI, lack of resources/resources can be better used in other areas where ROI is quicker, unreasonable terms by LA.

    5. Avatar MikeW says:

      @Matt
      When you calculate £177 per property, is that only using properties that aren’t served by VM?

      Otherwise it looks like you are going to fall through the cracks left by inflexible definitions and bad timing.

      Why have things stopped?
      I have no information, but it wouldn’t surprise me to see that Gigaclear’s prior involvement – and relatively low funding needs – has changed the landscape. I would guess that it has caused some hardened attitudes within the council; the councils might believe they can use that to drag a better deal out of BT, who has chosen instead to walk away.

      It’ll be interesting to follow, certainly.

    6. Avatar Matt says:

      @MikeW Yeah that’s only counting those who can’t get Virgin.

      189 Properties on cabinet, 52 can’t get Virgin. 52/189 = 28% on the cabinet can’t get superfastt broadband, which is above the 10% state aid cut-off.

      Openreach have quoted £9,233 to install a FTTC cabinet for Cheltenham 151. This works out at a cost of £177 per property (only taking into account the 52 who cannot currently get superfast broadband).

      Fastershire have confirmed we’re in an eligible area. It’s also been confirmed that £177 per property is less than the Fastershire average.

      You’d think all that would make us an obvious choice for FTTC…

  5. Avatar DTMark says:

    This is the killer line that led to this:

    “As the contract with BT nears completion there is a greater understanding of the premises that still require an increase in broadband speeds.”

    Why? Did the houses get up and walk somewhere else since the inception of the project and the planning?

    Supposing they did not, it was always easy – long winded, but easy – to predict what technology would be needed in which areas and to then apply the suitable technology in pursuit of the goals. The LA has a duty of care to their residents to make sure this is done competently.

    If the LA has simply left BT to cherry-pick the areas working towards a top-level target and then finds itself left with bunches of non-contiguous pockets of areas, both urban and rural afterwards, which cannot now be sensibly fulfilled by anything other then satellite, then this was an entirely predictable outcome, indeed the only likely outcome. “Planning for failure”. This LA also appears to have planned for failure in the deployed areas given that it hasn’t even hit the “90% superfast” target.

    Secondarily, BT’s refusal to participate dispels the notion that it is or ever was capable of being a “national supplier” offering services everywhere. This refusal and the existence of OFCOM’s enquiry into making changes to Openreach are surely not unrelated.

    And thirdly, isn’t BT supposed to be delivering 100% at 2Mbps+ by the end of this year anyway, or did the LA plan for that failure too?

    You really couldn’t make this stuff up.

    1. Avatar TheFacts says:

      The expensive consultants employed by the counties would have known the areas not covered. Without a 100% coverage there have to be some, maybe you could suggest where.

    2. Avatar DTMark says:

      What the quote implies to me is:

      “We gave BT some money and they did some stuff. We left them to get on with it.

      Now we’re left to pick over what they’ve done and get the job finished by someone else.

      And only now do we know the true scale of how much work that will be and how much it will cost to service fragmented pockets of areas, so we’ve gone out to beg the alternate suppliers we excluded and in some cases potentially permitted BT to overbuild, to put some money on the table and help us out.

      We need 20 houses down this lane done, one estate there, that road, that block of flats – but only those, but no over-building the BT project we paid for, just those if you would.”

      If so, it’s staggering incompetence.

  6. Avatar Pete says:

    BT need to stop dragging their heels and get on with it and why FTTC!! just go FTTH/P and don’t give me that ” its to expensive” BS, PON/GPON hello! This should be prioritised as an essential national project and BT forced to get on with it or give the contracts to someone, anyone, else. Hell give me the £800 million and I’ll find the companies/subbies to get cracking. No wonder we’re the laughing stock of the telecoms world, not even in the top 50 countries.

    1. Avatar TheFacts says:

      Where do you get £800M from to do 100% UK FTTP?

      Not in the top 50, where are we?

    2. Avatar NGA for all says:

      @Facts, I think the intervention area started at 108,000 premises and the subsidy was £35.7m and BT offered £20.9m ‘investment’ or we can ‘anticipate’ BT capital of £7.8m but not rely on it . A budget of £800m for FTTP points to £6,666 which is a bit OTT so Pete mat have meant circa £80m for Fastershire which is £23m more than the original budget.
      Even if it costs £40m more it does not explain how the the delivery of a few cabinets and a some FTTP by BT can result in this situation.

  7. Avatar BreakUpBT says:

    But Pete, if Openreach is allowed by BT to provide FTTP/H to millions, how will BT continue to shut out Sky/TalkTalk and Vodafone from directly investing in future-proof FTTH – as they are doing across Europe?

    And how will BT still be able to wring such huge profits from Openreach if they actually have to do a bit of investment?

    We can’t have real competition and future-proof infrastructure – that would be far too forward-looking and logical!

    1. Avatar Ignition says:

      Can’t tell if you’re a clever parody or you really are this clueless.

      BT can’t shut out Sky/TalkTalk and Vodafone from investing any more than they can shut out Virgin Media. Said companies have chosen not to build in scale for commercial reasons.

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