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Clawback to Boost Scotland’s Highlands Fibre Broadband Cover to 86%

Monday, October 31st, 2016 (3:50 pm) - Score 1,052
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Good news for those living in the rural Highlands and Islands region of Scotland. The £410m Digital Scotland programme with Openreach (BT) has announced that strong take-up of “fibre broadband” means an extra 6,000 premises will be covered via a reinvestment of £2.3m.

At present the project is working to roll-out the FTTC/P based broadband connectivity to 95% of Scotland by December 2017 (around 88% can already access “superfast broadband”), although the target for the Highland and Islands (HIE) region alone is currently just 84% by the end of 2016.

However the clawback (gain share) mechanism in related contracts requires BT to return part of the public investment when adoption of the new service passes beyond the 20% mark in related intervention areas, which can then be reinvested to further improve coverage and connection speeds.

Recently ISPreview.co.uk reported that take-up of “fibre broadband” services in the Highlands and Islands region had hit 22.9% at the end of June 2016 (here) and as a result we now know that this has returned £2.3 million for reinvestment.

Today it’s been confirmed that this reinvestment will help an additional 6,000 premises to access the service, which in turn should raise the coverage expectation from 84% to 86% by the end of 2017.

Fergus Ewing, Cabinet Secretary for the Rural Economy, said:

“There is nowhere in the UK where a broadband project has made a bigger difference to connectivity than in the Highlands and Islands. This first phase of roll-out has significantly increased access, with coverage across the region to be at least 84%, compared to just 21% that would have been delivered commercially.

Thanks to the success of the DSSB project, I am delighted that more premises than originally planned will now have the opportunity to benefit from reliable broadband.”

Charlotte Wright, Chief Executive at HIE, said:

“Good levels of take-up and efficient delivery of the contract have allowed us to re-invest in the project, extending the coverage in Highlands and Islands further again.

Superfast broadband is now available to order in 200 towns and villages which would not have been reached without the public investment. By the time we are finished in 2017 there will be even more.

The next steps will be to look at how we reach further and ultimately ensure that we can get superfast speeds to all. This will include areas not yet reached, as well as those who are part of the network already but currently too far from the current cabinets to have achieved superfast speeds.”

Apparently Shetland, Orkney, the Outer Hebrides, Highland, Moray and Argyll and Bute can all expect to benefit from an extension to the existing fibre broadband coverage. In addition, four areas which were not initially in the roll-out plan will also see some coverage: Duntulm and Sligachan in Skye; Sandness in Shetland; and Scarista in the Western Isles.

Elsewhere the Scottish Government has committed to deliver 100% coverage by 2021 (here) and they’re already looking at how this can be delivered. In keeping with that a new Open Market Review (OMR) will be conducted later this year to examine what commercial plans there are over the next three years, which should help to identify a revised “intervention area” for future deployments.

Below is a rough progress update on the current and future coverage expectations across the Highlands and Islands region.

Shetland

  • Shetland currently has more than 8,000 premises drawn into the fibre network through the project. There are 43 new fibre cabinets live across the islands which are reaching around 71% of premises so far.
  • Areas with live services include: Bixter, Brae, Bressay, Cunningsburgh, Gott, Hamnavoe, Hillswick, Lerwick, Quarff, Sandwick, Scalloway, Mossbank, Sullom Voe, Sumburgh, Vidlin, Voe, Walls, Weisdale.
  • Areas set to see some roll out (including extended coverage): Bigton, North Roe, Ollaberry, Sandness, Skellister and Symbister.

Coverage in Shetland is making use of Wireless-to-the-Cabinet (WTTC) technology for Bressay and Symbister.

Orkney

  • Orkney currently has more than 7,500 premises drawn into the fibre network through the project. There are 34 new fibre cabinets live across the islands which are reaching around 66% of premises so far.
  • Areas live include: Burray, Deerness, Evie, Finstown, Harray, Holm, Kirkwall, Orphir, St Margaret’s Hope, Stromness.
  • Areas set to see some roll out (including extended coverage): Birsay, Sandwick, Tankerness and Westray exchange areas.

Outer Hebrides

  • The Outer Hebrides currently have more than 7,400 premises drawn into the fibre network through the project. There are 56 new fibre cabinets live across the islands which are reaching around 48% of premises so far.
  • Areas live include: Back, Balallan, Barvas, Borve, Callanish, Carloway, Crossbost, Eriskay, Garrabost, Harris (Tarbert), Leverburgh, North Tolsta, Shawbost, Stornoway.
  • Areas set to see some roll out (including extended coverage): Benbecula, Berneray, Carnan, Castlebay, Gravir, Grogarry, Lochboisdale, Locheport, Lochmaddy, Ness, Northbay, Scarista, Scalpay and Sollas.

Highland

  • Highland currently has more than 67,000 premises drawn into the fibre network through the project. There are 267 new fibre cabinets live across the area which, when added to commercial roll-out, are reaching around 80% of premises so far.
  • Areas live include: Alness, Ardersier, Ardgay, Ardgour, Ardvasar, Aviemore, Avoch (Fortrose), Ballachulish, Beauly, Bettyhill, Boat of Garten, Bonar Bridge, Broadford, Brora, Cannich, Carrbridge, Castletown, Cawdor, Corpach, Cromarty, Croy, Culbokie, Dingwall, Dochgarroch, Dores, Dornie, Dornie, Dornoch, Drumchardine, Drumnadrochit, Dunbeath, Dunvegan, Duror, Edderton, Embo (Dornoch), Evanton, Fearn, Forss, Fort Augustus, Fort William, Fortrose, Glenurquhart, Golspie, Grantown on Spey, Halkirk, Helmsdale, Invergarry, Invergordon, Inverness, Inverness Culloden, Invershin, John O’Groats, Keiss, Kessock, Kildary, Kiltarlity, Kincraig, Kingussie, Kinlochleven, Kyle, Lochcarron, Lybster, Mallaig, Milton of Leys, Muir of Ord, Munlochy, Nairn, Nethybridge, Newtonmore, Nigg Station, Onich, Plockton, Poolewe, Portmahomack, Portree, Reay, Rogart, Salen, Rosemarkie, Salen, Spean Bridge, Strathpeffer, Strathy, Strontian, Tain, Thrumster, Thurso, Tomatin, Uig, Ullapool, Urray, Watten, Whiteface, Wick.
  • Areas set to see some roll out (including extended coverage): Applecross, Aultbea, Arisaig, Badachro, Balmacara, Barrock, Bridge of Westfield, Carbost, Dulnain Bridge, Duntulm, Durness, Edinbane, Farr, Foyers, Gairloch, Garve, Glenelg, Glenshiel, Glenmoriston, Gorthleck, Isle Ornsay, Kilchoan, Kinlochbervie, Kinlocheil, Kinlochewe, Kishorn, Lairg, Latheron, Lochbroom, Lochinver, Melvich, Morvern, Nigg, North Erradale, Poyntzfield, Raasay, Scourie, Shieldaig, Skeabost Bridge, Sligachan, Staffin, Stromeferry, Tongue.

Moray

  • Moray currently has more than 29,000 premises drawn into the fibre network through the project. There are 106 new fibre cabinets live across the area which, when added to commercial roll-out, are reaching around 90% of premises so far.
  • Areas live: Aberlour, Alves, Brodie, Buckie, Carron, Clochan, Cullen, Dallas, Dufftown, Elgin, Findhorn, Fochabers, Forres, Garmouth (Speybay), Hopeman, Keith, Kingston (Speybay), Kinloss (Findhorn), Lhanbryde, Longmorn, Lossiemouth, Rothes, Rothiemay, Tomintoul.
  • Areas under way: Ballindalloch, Glenlivet and Mulben.

Argyll and Bute

  • Argyll and Bute currently has more than 20,000 premises drawn into the fibre network. There are 96 new fibre cabinets live across the area which, when added to commercial roll-out, are reaching around 61% of premises so far.
  • Areas live: Ardentinny, Aros, Balvicar, Benderloch (Ledaig), Campbeltown, Carradale, Clachan, Connel, Craignure, Dalmally, Dervaig, Dunoon, Ford, Furnace, Innellan, Inveraray, Kilchattan Bay, Kilmartin, Kilmelford, Kilmore, Kilmun, Lochgilphead, Machrihanish, Minard, Oban, Rothesay, Scarinish, Strachur, Tarbert, Taynuilt, Tayvallich, Tighnabruaich, Tobermory, Toward.
  • Areas set to see some roll out (including extended coverage): Achnamara, Appin, Barbreck, Bowmore, Cairndow, Coll, Crinan, Glenbarr, Jura, Kilchrenan, Kilfinan, Kilmartin, Lochgoilhead, Port Askaig, Port Charlotte, Port Ellen, Portnahaven, Southend and Whitehouse.

Cumbrae and Arran

  • Cumbrae and Arran currently have more than 4,000 premises drawn into the fibre network through the project. There are 24 new fibre cabinets live across the area which are reaching around 87% of premises so far.
  • Areas live: Brodick, Corrie, Lamlash, Lochranza, Millport, Pirnmill, Shiskine, Sliddery, Whiting Bay.
  • Areas set to see some roll out (including extended coverage): Kildonan

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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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27 Responses
  1. Avatar NGA for all

    Great to see the progress.

  2. Avatar Diggory

    When do we get to hear from about clawback figures from the percentage of properties ‘passed’ that don’t get the required 24mbits?

    Searching back over ispreview articles it seems that only the underspend and take-up parts of clawback have been announced so far – or am I wrong?

    • Avatar NGA for all

      Strictly speaking it is just the clawback, underspend is the business of H&I and the BT capital is supposed to appear at some point.
      September 2014, Oxera report has H&I cabinet costs at £140k each due to the long transmission chains, this was with a national average of £25kish per installed cabinet. This will have dropped in H&I as more cabinets have gone in it to share the upfront costs. BT according to Audit Scotland also took a £20m up front loan from H&I and this I assume will feature as well at some point in the future.
      Interesting to see if BT’s capital is a uniform contribution to allowable costs across the country given the forthcoming market review?

    • @NGA for all – if you actually look at locations where cabinets are appearing, they are still very dispersed so long fibre runs compared are still the norm in HIE area

    • Avatar Steve Jones

      What clawback from premises that don’t get 24mbps? I’ve never heard of such a thing, nor do I understand which it would be any different. From what I understand, clawback operates on total take-up of lines, not just those which can nominally get 24mbps. Conversely, sub 24mbps premises passed do count towards the OR’s contracted targets for the superfast speeds.

    • Avatar Diggory

      Ah, sorry I mis-remembered how it worked. For some reason I had it in my head that the percentage targets were for number of ‘fibre enabled’ premises, and that there was a clawback mechanism dependant on how many couldn’t get 24mbps.

      Whereas the target percentages are actually for number of premises that can get 24mbps and OR only get money for those premises. Is that right?

    • Avatar MikeW

      Yup. The targets are set for just the number of premises who can get superfast speeds; BT have to achieve these numbers … and any premises that get improved but fail to reach 25Mbps are “merely” a side-effect. A happy one, or a sad one, depending on individual circumstances.

      The choice of cabinets is done to achieve a “value-for-money” outcome: most premises per £. This value comparison is done using only the number of premises that achieve superfast speeds.

      If the subsidy money runs out, and BT haven’t achieved the target, then they have to continue self-funding until the target number of premises is reached.

      Clawback, on the other hand, works on takeup numbers. Here, it appears to be irrelevant whether the subscribers achieve superfast speeds or not. Just that they are using the infrastructure.

    • Avatar Steve Jones

      There was a small, but rather important error in my response as it reversed the meaning of a critical sentence. It should have read. I ommitted the word not in the following sentence. The number of times I curse the lack of the ability to correct typos and other mistakes on my postings on this site…

      “Conversely, sub 24mbps premises passed do NOT count towards the OR’s contracted targets for the superfast speeds.”

      This also ought to cover this claim than NGA is always making that BT haven’t made their contracted capital contribution. It was never like that, not least because the aim was to roll this out as cost-effectively as possible (hence the underspend) which would mean less spent by both BT and BDUK for a given number of enabled properties which would, in turn, allow for projects to reinvest savings if desired. Of course, any extension under the original contracts beyond the initial targets would, naturally, increase the total amount of BT capex according to the call-off contracts.

    • Avatar NGA for all

      @Steve I beg to differ. The BT capital contribution to allowable cost is an absolute amount – £358m – Phase 1 NAO 2013. It must emerge even if latterly in the investment funds.
      It needs to be added to the clawback owed, paid back or preferably used to extend the roll-out. Matt Hancock WPQ47312 Oc 12th begins to correct the record on this matter, but more is needed to clarify the position.
      Why would BT’s capital be visible in HIE when they borrowed £20m from the project and are billing all their invoices and timesheets.

    • Avatar Steve Jones

      @NGA

      No, it is not an absolute amount. In any event, the way that clawback operates means that BT capex is inevitably increasing as it’s paying back grants which offset which offset some of BT’s capital spend (which is in the accounts). As some of that grant gets paid back, then that part will end up on BT’s books as capital expenditure.

      So, you’ll get your wish that the BT capex will go up (and, indeed it has been), but that will be as a results of capex and/or further extension of the contract.

      As it is, BT will have shortly have met it’s phase 1 deliverables on all but a few BDUK contracts (which were “passing” a defined number of premises at 24mbps or more) with a given amount of gap funding. That there is underspend and clawback money to reinvest is, of course, a good thing and that will involve capex, but I’ve yet to see anything which commits BT to a given level of capex. Conversely (as the NAO report noted), the downside risk was on BT in that if it failed to reach the contracted number of premises within the defined BDUK gap funding, it would have to fund those using its own resources.

    • Avatar NGA for all

      @Steve The NAO 2013 says so, as does the new Minister WPQ and BDUK in their CMS submission.
      If your saying Gainshare is not generated by incremental take up but is actually reflecting some of the capital owed then perhaps some term other than gainshare should be used.
      As it stands the first £258m is tied to the increase in take-up as per BT representations, additions to this might well be the capital owed being now added.

      But this £2.3m is only a proportion of the £129m – clawback to July 2015 so much more owed.

    • Avatar Steve Jones

      @NGA

      This is the 2013 NAO report, and I can’t find any reference to a contractual fixed level of contribution. However, I’ve attached a quote taken from para 3.17, which states that the BT contribution is lower than that modelled by the department, but what the DCMS modelled (and turned out to be incorrect at the time) is not the same thing as a contracted figure. Fig 14 also shows this. However, I emphasise again, that the mechanism of clawback does effectively increase the supplier capex. In any event, as BT don’t list BDUK specific capex figures in their annual reports, it seems to me rather difficult to say what BT’s capex on these projects has been as we are not party to the invoiced costs (although clearly the NAO has access).

      So, perhaps you would reference the part of the NAO report that does show a contracted figure for BT capex.

      “The Department allocated its funding on the basis of its conservative model, recognising
      that this was built on assumptions that would need to be validated over time. This
      conservative model projected a capital cost of £1,547 million and that suppliers would
      contribute around 36 per cent of total Programme costs, some £563 million. The latest
      projections extrapolated from 19 finalised contracts suggest that total cost will be
      almost the same at £1,576 million. However, the local authority contribution has risen by
      over £200 million to 46 per cent of the total. This is mostly because the Department’s
      estimate of the supplier funding they would be able to attract has proved too optimistic.
      BT is now expected to provide only 23 per cent of funding, with contributions ranging
      from 15 to 38 per cent. Overall BT is expected to commit £207 million less to the
      Programme than the Department had modelled in 2011.”

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

    • Avatar Steve Jones

      @NGA

      So in 2011, the DCMS expected the supplier to contribute £563m, and at the time of the report, that expectation had dropped £207, to £358m. However, that’s an expectation. It’s an estimate, not a contracted amount. I’ve no doubt if the calculations were done now, it would look very different following the operation of clawback.

  3. Avatar NGA for all

    Question for BT folk, so 6,000 premises will equate to 27 cabs, and £2.3m/27 = £85k a cabinet budget in H&I, when all the long transmission chains and submarine cables are in place and paid for.
    At 228 premises per cab (142,900/626) and a 23% take up, it would seem cheaper to do FTTP rather than plan to exclude those more than 1200 metres from planned. Is it just a resource – knowledge issue? It cannot be fun finding power for some of these.

    • @NGA for all – why does 6,000 premises equal 27 cabinets? Don’t see any mention of 27 cabinets being paid for by the £6,000.

      HIE is one of those areas where extrapolation from other figures in other parts of the UK do not work, due to the very different population demographics.

      All the 6,000 with £2.3m tells us is that they are setting to spend an average of £383 per premise.

    • Avatar TheFacts

      Elsewhere we find a cabinet serving 18 premises.

    • “mention of 27 cabinets being paid for by the £6,000”

      Should really have been

      “mention of 27 cabinets being paid for by the £2,300,000 in the press release

    • Avatar NGA for all

      Andrew – your numbers add to 142,900 premises and 626 cabinets so 228 a cab is not unfair which allows an estimate of c27 cabinets. Correct it should read £2.3m/27 as you stated.

    • Avatar NGA for all

      @Andrew £383 is a very high indicative for FTTC passed, it does not answer the question why you would not switch to more FTTP in some of these cases.

    • Avatar Steve Jones

      @NGA

      Has it occurred to you that as the project is extended to more remote areas, that the number of premises within reach of each cabinet will inevitably decrease? Extrapolating existing averages into more difficult-to-reach locations is not a valid approach. Additionally, it might be expected that a higher percentage of funds will be spent on FTTP.

    • Avatar NGA for all

      Steve, indeed this is why FTTP is referenced, and why I was seeking an opinion from BT folk.

  4. Avatar Pauwillson23

    @NGA

    The article states that there are new areas being included, so there will not be all the spine/backhaul cabling there.

    In most of the remote areas, utilities tend to run close to each other, i.e. they follow the road, so not necessarily difficult to find power.

    The 6000 is >24mb prems so there will be additional prems in the <24mb category connected to those cabs. Its also quite likely that they will be doing Copper rearrangement on smaller clusters and deploying new PCPs, so not simply putting DSLAMs next to existing ones.

    This cost may be overstated as Openreach uses fairly simplistic modelling approach, which doesn't account for all of most recent build out. Whilst that may seem fool hardy, remember the costing approach has to be consistent across all forty contract areas.

    The same principles apply to this as the original contract. If there is underspend, it can be reinvested into further coverage.

    That is my view as someone who previously worked on the HIE contract for Openreach.

  5. Avatar TheFacts

    @NGA – to simplify the discussion, if possible. Assume a contract for an area is split 3 ways between LA, BDUK and BT. BT submits invoices and timesheets to the LA for payment at regular intervals, how is the BT contribution managed?

    • Avatar NGA for all

      Facts, BT submits all its invoices and they get paid. The budgets get inflated so the cost never reach the point where BT capital was needed, hence it is outstanding and hence these investment funds.

    • Avatar TheFacts

      Please explain ‘The budgets get inflated’ and how the process of BT capital contribution was supposed to work.

    • Avatar NGA for all

      @Facts, – just look at the NAO 2013 and see that the cabinet cost only represented 36% of the ‘bid’ price.

      The easier way is show that Fujitsu with no network to call its own, BT would only need to price £1 below the cost of building a new network to win ‘competitive’ bid, while only needing to overlay fibre on its existing network.

      In the circumstances how would not inflate costs to absorb the budget available?

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