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Leicestershire Approve £5.63m Project to Extend Superfast Broadband Cover

Tuesday, July 18th, 2017 (11:39 am) - Score 736
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The Leicestershire County Council appears to have moved forward with Phase 3 of their on-going Superfast Leicestershire project, which will commit up to £5.633m to extend “superfast broadband” (24Mbps+) coverage to the final 3% of local premises (i.e. as many as they can reach).

At present the existing contracts, which are supported by Openreach’s (BT) FTTC and FTTP based “fibre” network, have already helped to extend superfast broadband to an additional 73,000 premises and the aim is to reach another 11,000 by September 2018 (around 97% coverage). We should point out that the total coverage extension for Phase 2 is 19,000 extra premises.

By comparison the new Phase 3 scheme, which could begin its deployment during Autumn 2018, will try to extend further into the final 3% of premises. It’s predicted that, once Phase 2 completes, around 13,000 properties in the county will still be unable to access a superfast broadband connection.

Council Leader, Nick Rushton, said last month:

The city and county’s economy is on the up, and broadband is an essential driver for further growth, innovation and job creation. Residents and businesses need reliable, fit-for-the-future communications. That’s why we’ve ploughed more than £33m into superfast broadband, and I’m pleased the network is set to grow even further.”

A big chunk of the money for this is actually public investment that will be returned by BT due to strong clawback (high take-up) and underspend from earlier phases of the project. The Authority will aim to follow the OJEU procurement processes for Phase 3 and this has now begun, with a view to contract(s) being signed by the end of March 2018.

However £5.63m is unlikely to be enough to plug the whole of the remaining 13,000 gap. Otherwise anybody who enjoys looking at the boring financial side of things will probably want to take a closer look at this document, which reveals a lot more information about how the Gainshare and other aspects of funding are to be handled.

leicestershire phase 3 broadband project

UPDATE 1:09pm

A related press release has now popped up on BT’s website concerning a £4.4m extension (here), which states that a further 2,000 premises will now be included as part of the current roll-out, although this appears to be part of the existing 97% coverage target (due for completion by September 2018) rather than the above focus on Leicestershire’s final 3% (it’s getting hard to keep track of all these extensions).

Matt Hancock, Minister for Digital, said:

“Superfast broadband is increasingly at the heart of modern life and we are determined to make sure everyone has the fast and reliable connectivity they need. This is great news for Leicestershire and such a strong take-up rate is an inspiration for other parts of the UK. We have already taken superfast broadband to 93 per cent of UK homes and businesses, and I’m delighted that another 2000 premises in Leicestershire will now be included in the rollout.”

Below is a list of areas within each district due to gain new or additional coverage through this extension phase of the roll-out. Not all properties in some of these areas will benefit initially.

Blaby: Earl Shilton, Elmesthorpe, Potters Marston, Sharnford & Wigston Parva
Charnwood: Six Hills & Walton on the Wolds
Harborough: Stretton Hall & Wibtoft
Hinckley and Bosworth: Cadeby, Far Coton, Gopsall, Lindley, Osbaston, Pinwall, Sheepy Magna, Shenton, Snarestone & Wellsborough
Melton: Belvoir, Brooksby, Gaddesby, Little Dalby, Saxelbye & Scalford
North West Leicestershire: Coleorton & Farm Town

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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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25 Responses
  1. Avatar MikeW

    Hey, @NGA … note what is happening here. Para 13, and the use of the “underwrite” term especially.

    It means that the council are making plans to spend the clawback, and then contracting to spend the clawback, and then spending the clawback. All without the money actually being present in the council’s coffers right at this moment.

    Now will you believe me?

    • Avatar Steve Jones

      I have noticed some change to @NGA’s line on BT capital contributions under the BDUK project. But what this does confirm is that there’s a lot of political involvement and red tape involved in what is done with the reinvestment funds under BDUK.

    • Avatar NGA for all

      MikeW progress on the costs, c£24k a cab is not £40k or a £100k, this is good. Where is BT’s capital from the £8m? You would expect to see £4.5m bt capital netted against the cost.

      Spending against the clawback due in 2023, that is good as well. But the capital looks to be missing from the analysis, but that could also be sitting in the investment account. But for a very long time.

      A little to go yet, but I do not understand what is meant by earmarked funds of £16m compared to the £4.5m to £5m estimate in para 31.

      What you must see that the funding and plan presented meant no BT funds would be needed. This is why they need to be reconciled.

    • Avatar NGA for all

      Steve – As the capital deferral rises (£446m) then my position adjusts, but this is good case to seek what should be an upfront contribution to allowable costs of c£4.5m. This is central to the operation of the gap funding model.
      Unless there is a lot of FTTP it looks to be missing, but it may rest or be nudged into the investment fund until 2023.

    • Avatar Steve Jones

      @NGA of course BT’s effective contribution increases with the working of Gainshare. That’s how the contract works. Not only do they have to refund some of the original grant, but if there is an extension project then there will be at least some contribution with the framework (albeit likely to be proportionately less with the more expensive to reach properties). But that was never your case – it was that BT was not making its capital contribution based on the original level of take-up.

    • Avatar MikeW

      @NGA
      What £8m? Are you talking about BT’s original portion of phases 1 and 2? £8.3m of capex and opex originally, increased later to £8.9m, as reported in the LCC Report that Mark links? What is your (later) £8.6m? Is that related?

      If you are talking about BT’s contribution, then …

      As ever, you wouldn’t expect to see BT’s contribution in here. Nor would that money go via any “investment account” or “clawback account”. The capex part will have been spent – gone to Huawei, Telenet, etc. That’s why it is called expenditure! Remember the cashflow sankey-diagram I drew for you?

    • Avatar NGA for all

      Steve, The remaining part of my case is that the capital is still missing. The cost concerns where unit costs were used has been dealt with mostly.

      Mike W – cannot be as it would take cab costs over £40k a cab in this case, BT evidence to CMS was clear, Phase 1 average £26k, from which they pay their share. It is not visible here.

  2. Avatar NGA for all

    Phase 1 total subsidy was c£7.1 (from £9.7m) for an estimated 295 cabinets serving 65,000 premises. That is subsidy of c£24k each. Too high I think. That suggests the BT capital expenditure is also sitting in the investment account until 2023.
    Of the BT £8.6m – we would expect to see a £4.5m capital contribution unless lots of FTTP was included. This is not visible in the process.
    Perhaps someone from Leicester can clarify the cabinet total for Phase 1 and the reconciliation of the capital.

  3. Avatar TheFacts

    @NGA – time for you to find someone to agree with you.

    • Avatar NGA for all

      Time for someone to prove me wrong, please! Either the phase 1 cabs and fibre paths cost £24k each and BT capital is in the investment account and owed, or they cost £40k each in this case due to some consistent extreme geographic or network anomaly.

      A third option is that BT will make all its contribution in the clawback mechanism in 2023.

    • Avatar CarlT

      I’m afraid it doesn’t work that way. The onus on those making the claims is to prove their claims, not for someone else to disprove them.

      No-one can disprove the existence of the flying spaghetti monster. It seem likely to you?

    • Avatar NGA for all

      CarlT – The underspends in every county are apparent and proven, the clawback scale of £446m is another element of the proof. But yes, LA could be holding balances and not reporting them.

    • Avatar TheFacts

      @NGA – so there are 3 options and you, our expert, does not know which is correct.

    • Avatar Steve Jones

      @NGA

      There are underspends in most, if not all of the BDUK projects. That money is still with the local BDUK projects. Also, if the local BDUK project underspent through savings, then so will BT as underspends are shared. So what? The BT contracts were against specific numbers of premises using the framework contract, not to spend a specific amount of money. As the NAO noted, BT were solely responsible if there were to be an overspend, so it’s not surprising (as the NAO noted) that BT weren’t exactly incentivised to underprice things.

      As it is, the local projects appear to have some money left over from underspend and from expected Gainshare repayments which will substantially expand coverage.

    • Avatar NGA for all

      Facts, options yes.

      Steve, So What? the gaming of costs and capital deny some of the rural economy the upgrades needed. It leads to sub-optimal approaches to the USO, and there is now hundreds of millions tied up until 2023.
      Less gaming of the process would have led to a more generous FTTP plan with more folk trained to do the work efficiently.

    • Avatar Gadget

      But it cannot be all, or even mostly gaming if the initial contract specifies the method, interest accrued and timings for gainshare repayment! In fact, regardless of who originated the proposal, much of the increased cover is due to both parties agreeing to recover the amount earlier than contractual stipulations for the benefit of the end-users.

    • Avatar NGA for all

      @Gadget, on balance I think it is gaming as these changes are coming 5 years after the initial gambit and denials of cost inflation. It is not really increased coverage but keeping the funds in place to do what was initially budgeted.
      I am not sure you can read BT representations on costs to the CMS select committee in 2016 and not conclude the gaming of costs was widespread.
      BT is not making available all £446m or presenting a plan for how it might be used. Instead there are references to self-funding the USO, when there are still some £600m of subsidies yet to be spent and all the clawback to be invested, reducing the need for the B-USO in its current form.

    • Avatar Steve Jones

      @NGA

      It is not, and never has been up to BT to decide whether to reinvest all that £466m. The decisions are with the BDUK projects whether they reinvest or not (and it seems almost all are doing so). The £466m is, in essence available as a credit to offset further expansion. I’ve no doubt that BT have every interest in seeing that £466m being used to extend the network and no doubt are making submissions on what might be done, but it requires those new extension contracts to be put in place and signed.

      As for any other unspent public funds, that’s also clearly with those in the public sector who are commissioning the spend. It seems that some of the unspent satellite funding is being put back into the pot, and there may be other sources. But that is, again, all down to the local commissioning projects and their political masters.

  4. Avatar Steve Jones

    @NGA there is still no logic in your argument. The contracts where for the relevant phases, and if savings have accrued to the public funds, they remain for re-investment (along with Gainshare). Once the goals have been met for a given phase, the contract is fulfilled for that phase. Period. There is no provision in the contracts for BT to invest whatever money you happen to think is underspent (figures which neither you or I have access to). Contract extension using Gainshare and savings are now being made which is increasing coverage substantially beyond what was originally contracted so that is happening. That also means that BT’s capital contribution has increased, both because of the repayment of grant money via Gainshare and because any extensions will involve at least some degree of BT contribution according to the framework contract.

    If this had been a fixed price contract, then there would have been no extensions. It would have just stopped at the end of the contract with no new phases. As it is, the savings are being reinvested to everybody’s benefit.

    • Avatar NGA for all

      Your definition of ‘savings’ is at odds with events. Budgets were set out around the intervention area, not phases. The phases were at the discretion of BT, I cannot see LA’s refusing more coverage.
      Your argument only holds if there is an active plan for the all monies available to benefit those being excluded so far from the programme.
      Some extensions are planned but much more was and is possible. It is not logical to have £446m (and growing) less £130m tied up until 2023 as this note implies.
      ‘Savings, implies efficiencies, I doubt we will find actual efficiencies if we were allowed to examine the numbers.

    • Avatar NGA for all

      One final observation, if the extent of phases of work were planned where the phase could be completed relying only on the subsidy, then this is not ‘savings’ either, it leads to a sub-optimal programme with more phases and costs than needed.

    • Avatar Steve Jones

      @NGA

      Good heavens, the phases are most definitely not at BT’s discretion. The phases are defined by the local BDUK projects as are the deliverables for those projects (which are contracts in their own right). It is also the local BDUK project that declares whether a given phase has ended and the contract therefore completed (subject, of course, to any future Gainshare repayments which effectively operate as a credit for any extension phases).

      That’s not to say that BT don’t have a huge amount of influence, and clearly they are incentivised to deliver to the most cost effective locations first, but there is a degree of priority setting by the local BDUK projects.

    • Avatar NGA for all

      Steve, Fujitsu had withdrawn from taking part in the BDUK Framework (post North Yorkshire) so Councils were wholly reliant on BT and their confidentiality agreements and a far from complete BT commercial roll out plan.
      Continued scrutiny will allow more funds to be returned for a more complete body of work in rural.

  5. Avatar CarlT

    The exchanges in the comments here are illuminating.

    • Avatar NGA for all

      Your right to be bored with a discussion on the funds which are sufficient to do another 500k-750k FTTP in very rural. Forbearance is needed. However, this might now provide a focal point for the Openreach consultation as a place to begin and test things like ‘cutover’ and supporting cost recovery. There is still over £1bn in total available for rural networking if we take the £600m yet to be spent, underspends (£200m), clawback(£446m and rising) and balances in investment accounts/bt capital (unknown).
      More critical, and perhaps where I am weakest is the assumption(implicit) that BT can do the job (FTTP) efficiently and are willing and resourced to do so. This is far from clear and ultimately the gaming of costs has meant the resourcing and training has been avoided for 4-5 years. You cannot prepare fully for something if you portray FTTC costs as a factor 2 to 3 times higher than actual and make representations to Parliament on that basis.
      Your own direct experience on these matters remains an excellent example of the issues and how they were played out.

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