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2016 Audit Reveals Scotland’s Superfast Broadband Roll-out Progress

Thursday, August 18th, 2016 (12:01 am) by Mark Jackson (Score 851)
scotland_broadband_map_project_split

A new report from Audit Scotland, which works to ensure that public money in Scotland is spent correctly, has found that the £410m Digital Scotland roll-out programme with BT has achieved its initial coverage target. But delivering 95% “fibre broadband” coverage by December 2017 “will be more challenging.”

The contract aims to ensure that “fibre broadband” services are available to 85% of premises by the end of 2015 March 2016 and 95% by the end of 2017 (recent updates have used the March 2018 date), although the coverage target for the Highland and Islands (HIE) region alone is currently just 84% by the end of 2016.

The funding for all this is via a mix of public and private investment, which is split into two regional projects, as also depicted in the opening picture for this article (top left).

Digital Scotland’s Contract 1 Funding

The Highlands and Islands (£145.8m):
• £126.4m from public bodies (Scottish Government, Broadband Delivery UK [£50.83m], Highland and Islands Enterprise and all seven local authorities in the project area)
• £19.4m from BT.

The Rest of Scotland (£264m):
• £157m from public sources (Scottish Government, ERDF, Broadband Delivery UK [£50m], and all 27 local authorities that form part of the Rest of Scotland Project area)
• £106.7m from BT.

According to today’s report, some 2.2 million out of 2.6 million premises across Scotland had gained access to “fibre broadband” (86%) by March 2016, which is 1% more than the Scottish Government’s original target and more than 500,000 of these gained access through the contracts (the most recent data shows that this has since risen to 600,000).

Interestingly the report notes how BT “stated in the contracts” that it expects 77% of premises to achieve “superfast broadband” download speeds of more than 24Mbps (Megabits per second), although it couldn’t guarantee this due to the variable nature of copper cable (longer copper lines deliver slower speeds) and other reasons (both geographic and technical, such as poor home wiring).

Meanwhile the Scottish Government recently stated that 87% of premises with access through the contracts should now be able to receive modelled speeds of 24Mbps+, which equates to 81% in the Highlands and Islands region and 89% in the Rest of Scotland area.

Caroline Gardner, Auditor General for Scotland, said:

“Fast, reliable internet access is increasingly essential for everyday life, so it’s encouraging to see good progress being made in rolling out fibre broadband. However, there is a lot still to be done by the Scottish Government if it is to achieve its vision of a world class digital infrastructure, particularly in improving download speeds in rural areas.

It’s important that it continues to monitor the cost and progress of broadband rollout so that these communities aren’t excluded.”

The headline figures sound good, but the audit notes that some areas are still falling way behind (i.e. 26 of Scotland’s 32 council areas have met contractual targets).

scotland_broadband_progress_2016

As you’d expect it’s the most remote rural areas, which are usually last on the list to benefit due to taking longer to roll-out and requiring more investment per property, that continue to suffer the most and Scotland has a fair few of those.

Ofcom’s data reports that 14% of premises in Scotland cannot even receive a 10Mbps speed and most of these premises are in rural areas, where this figure rises to 57% of premises. However Ofcom’s data hasn’t been updated for awhile and Thinkbroadband suggests that the 14% figure is now probably closer to 7.5%.

scotland_10mbps_broadband_progress_2016

Next we move to the subject of cost. The report confirms that there is a cap of £1,700 on how much BT can spend on each premise, which is not unlike other Broadband Delivery UK linked contracts. BT can still deploy in areas where the costs might be higher, but it depends upon their own “value-for-money considerations” (e.g. levels of existing coverage and the availability of other options).

So far the some £156 million of public funding has been paid to BT for work done up to March 2016, which equates to £76m from the Scottish Government and £80m from the Highlands and Islands Enterprise (HIE). Apparently this leaves £24.5m as “unpaid“, which the HIE said is at least partly because BT has been slow to send out invoices and thus the operator is now reviewing their financial model.

Elsewhere BT has experienced lower than expected costs and higher than expected take-up. Under the clawback clause if take-up goes above 20% in the intervention area then BT has to start returning public investment (26% had connected in the Highlands and Islands and 23% for Rest of Scotland at the end of June 2016), which can be used to further expand coverage.

As a result of the above BT is said to have contributed £23 million more to help extend broadband coverage (£17.8m from clawback). The Scottish Government has also earmarked a further £42 million of public funding for a future contract, although we’re still waiting to see a concrete strategy for how this will be spent.

Part of the reason that the new contract is taking so long to prepare, aside from the known EU State Aid delay, is because BT’s modelling work is said to be “taking longer than anticipated … because competitors are building in areas where there had been no previous indication the market would invest.”

However Scottish ministers did recently (May 2016) commit to deliver 100% coverage of superfast broadband by 2021 and the above investment will play a part in that, although the report confirms that more money will still be required in order to achieve the new goal.

Separately the Scottish Government’s Community Broadband Scotland (CBS) initiative, which focuses on some of the most remote areas where not even BT dares to tread, has approved funding of £2.1 million towards the cost of 15 projects that will provide 3,950 premises with access to superfast broadband (13 of those are live). However “there are more projects in the development pipeline than CBS currently has budget for,” which means they’ll probably also be getting a boost from the aforementioned pot.

Overall the Audit Scotland’s report suggests that the contract is making good progress, but they also call for a “clear plan” to deliver the new 100% coverage goal and boost take-up. On top of that they’ve once again called for there to be “improved public reporting of progress and performance, to measure the benefits achieved from its investment and to allow benchmarking with other countries.” We’ll finish with an interesting map of progress..

scotland_broadband_progress_map_2016

Audit Scotland 2016 Report
http://www.audit-scotland.gov.uk/../nr_160818_broadband_update.pdf

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14 Responses
  1. NGA for all

    So the clawback owed due to take-up is clear, the underspends are clear even with the 18 submarines cables but the presence of the BT capital is far from clear. £19.4m foe H&I and £106.7m for ROS.
    500,000 premises points to 2,500-3,000 cabinets, even with submarine cables excluded, average payments would in excess of £40k each, and they is underspend being reported and a £20m loan.

    • TheFacts

      So the basis of your court case is that there is no capital contribution from BT for any BDUK project?

    • NGA for all

      The Facts -This report failed to reference BT’s capital contribution. Everything else is coming on, the underspends are predictable, the clawback is in BT’s accounts but being used to plan more, we just need an explanation of the BT capital contribution and it is not there.

      Can you explain it? £156m payments for 500,000 premises passed (c2,500 cabinets) including c£18m for the submarine cables. R4 makes a reference to a reduced BT spend without providing any detail.

      The £17m or £23m clawback was part of the £129m, not the total of £256m +£12m (from Q1 -2016), so that much more work can be planned again.

    • MikeW

      Given this is a report by auditors, the absence of a remark about capital contribution is actually healthy.

      We know that BT consider it to be one of the aspects to be held closely, as a commercial confidence, and the BDUK projects agreed.

      That puts the onus on the auditors to mention any anomalies, even if they don’t mention the numbers. They don’t mention any such thing … when they patently could.

      At some point, you have to decide, “Do I trust the auditors?”

    • TheFacts

      @NGA – do we know the actual amount BT has spent on the project?

    • NGA for all

      The £19m and £106m are in every press release so it can be commented upon. Why would the payment or non payment be confidential given it is the PR.

      The auditors can only work with what they are given.

      We know BT have billed all the invoices they can and it is £156m to March 2016.

      The CMS Select Committee report referenced a concern from the Scottish Government that they had no insight into BT investment level. There was no follow up here which is a little surprising.

    • TheFacts

      @NGA – Why don’t you contact AuditScotland.

    • NGA for all

      Facts – done, but if is like the Welsh they will acknowledge the issue and say they will return to the matter in a future report. In the meantime BT is free to game the monies as the expense of the depth of rural infrastructure delivered.

      I assume the issue of ‘greater separation’ is under control and BT can rely on Ofcom not to model the state aid receipts in its NGA Cost Modelling as part of the WLA exercise.

    • TheFacts

      So this has been going on for a long time yet the counties, countries and BDUK and their auditors say nothing about it.

    • NGA for all

      The Facts The Scottish Government has raised the matter, The Scottish Futures Trust is now raising the matter.

      Oxera referenced BT capital featuring at the end of the process, but no reports of the ‘true ups’.

      It is the case that bluff on costs was so high, hence the consistent reporting of underspends that the capital contribution was something left to be resolved.

  2. Craski

    Looking at the second graph, some council areas have achieved a lot in the circa 3.5 years that Digital Scotland BDUK projects have been running for, some even look to have increased premises covered by 50% in that time.

    e.g. For Aberdeenshire, it looks like it has taken 42 months to add 50% coverage which is approx 1.2% per month increase (very simplistically!).

    A number of the councils are hovering around the 80% coverage with a target of 95% so have to add 15% over the course of 15 or 16 months. It will be tight but maybe they can just achieve it.

    • MikeW

      It might have been that long since first contracts, but the cabinets only started to go live 2.5 years ago.

      That would change the simplistic rate to 1.7% per month. It is probably better to use this rate when looking forward, as the current projects don’t have to go through the build-up phase again.

      Does that make things feel a bit more achievable?

    • craski

      It is still a real shame Digital Scotland wont publish roll out plans beyond 6 months. I know it is frustrating to have a planned date continually move right but is that any worse than not having a date (which IMO gives impression an area is being ignored).

  3. Kev

    I am fed up of being told my cabinet will be deployed within the next 5 months: this was a year and a half ago. Their ‘beta’ site still says it’s in build stage. Well, their build stage is different to mine. They’ve kindly marked out the pavement where the cabinet and service cables will land, however that’s all they’ve done on this build. The local council state full permissions have been given, so it’s up to OR!

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