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£28m Deal – Nearly 15500 Premises in Warwickshire to Get FTTP Ultrafast Broadband

Wednesday, September 13th, 2017 (7:52 am) by Mark Jackson (Score 548)
openreach_2017_fttp_engineer_install

The CSW Broadband project, which aims to make “superfast broadband” (24Mbps+) available to 98% of premises in Warwickshire, Solihull and Coventry (England) by the end of 2019, has agreed a £28m Phase 3 contract with Openreach (BT) to roll-out 1Gbps capable FTTP to nearly 15,500 premises.

The Contract 3 (Part 1) deal is being funded by £4.8m from the local authorities in Coventry, Solihull and Warwickshire, £7.2m from the Government’s Broadband Delivery UK (BDUK) programme, £2m from the European Regional Development Fund (ERDF), £13m from BT and £1m from Coventry & Warwickshire Local Enterprise Partnership (CWLEP).

It’s good to see that BT are making a bigger contribution this time around. The original Contract 1 was worth £15.47m (£5.67 million from BT and the rest from public sources), while the Contract 2 Part 1 extension came to £10.73m (£2.61m from BT) and Contract 2 Part 2 was supported by £2m in public funding clawback (reinvestment) from the first contract.

So far most of the earlier contracts have been dominated by the roll-out of Openreach’s slower ‘up to’ 80Mbps Fibre-to-the-Cabinet (FTTC) technology, although this has been significantly scaled back for Contract 3. Instead the operator envisages that “almost” 90% of the 15,500 premises can expect to be reached via their latest 1Gbps capable Fibre-to-the-Premises (FTTP) technology.

Peter Butlin, Deputy Leader of Warwickshire County Council, said:

“Today’s announcement is great news. When the CSW Broadband project started, just over 73 per cent of premises in Warwickshire could achieve speeds of 24Mbps or above. Today we’re looking forward to more than 98 per cent being able to achieve what would at one time have been unthinkable speeds of over 30Mbps. The CSW Broadband team is actively seeking funding to take the fibre network still further.”

Unfortunately we won’t learn which will be the first areas to benefit from Part 1 of Contract 3 until early next month, when they will be revealed via the project’s website.

Steve Haines, MD of NGA Broadband for Openreach, said:

“This major investment is a vital new chapter in the story which began nearly three and a half years ago, when the partnership began connecting its first premises in Snitterfield. CSW Broadband is already a huge success and now we’re set to go even further as it reaches into some of the region’s most remote areas.

The roll-out of high-speed broadband across Warwickshire, Coventry and Solihull has transformed the way people get online which is why we’re committed to making this exciting technology as widely available as possible.”

So far around 60,000 properties (c.230,000 if you include Openreach’s existing commercial “superfast” network or c.245,000 for their raw “fibre based” footprint) have benefited from the roll-out and the estimated coverage level for “superfast broadband” currently sits at around 93-94%, which means that the existing contracts are running to schedule (i.e. expected to hit 94% by the end of 2017).

Engineers from Openreach will begin work on this third phase during Spring 2018 and the roll-out is then expected to reach the first premises in around 12 months’ time, with all the upgrades due to be completed by the end of 2019.

It’s interesting to note that we’re seeing a growing trend from Openreach to adopt FTTP for the final contract phases. In many cases this means that related rural areas will benefit from faster broadband speeds than earlier phases, which tended to focus on more populated areas.

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18 Responses
  1. Steve Jones

    “Contract 1 was worth £15.47m (£5.67 million from BT and the rest from public sources)”

    Of course that was the original contract based on the 20% takeup rate modelled. However, it ignores the operation of gainshare, which has had the effect of increasing BT’s contribution and reducing the public fund element. If Warwickshire is typical of BDUK as a whole, something like 40% of the original phase 1 grant money is being returned. With the operation of gainshare that means the BT contribution will have been more like £10m.

    In the case of the new contract, it will surely have been modelled with a much higher take-up rate which will, of course, mean that the gap funding element will have been reduced. The ultimate net effect will be much the same, albeit that in commercial terms more of the risk will have been passed to BT with that assumed higher take-up rate (albeit a fairly good bet).

    The original NAO audit noted exactly this. That is that there was an incentive for BT to make conservative assumptions in the original bids in order to minimise its downside risk.

    I’m assuming that much of the public money for this new phase is actually gainshare money. If we start adding the original contract public funding rather than the actual net amount (after gainshare and cost savings), then we will be in danger of double accounting public funds and under-counting effective BT contributions.

    As far as the greater prevalence of FTTP is concerned, then it is surely inevitable that this will be the case as, with the absence of a cost-effective FTTRN/FTTDP solution, the economics dictate that GPON FTTP becomes the more efficient solution.

    • Some good points.

      I’m assuming that much of the public money for this new phase is actually gainshare money.”

      The PR only mentions Contract 2 Part 2 for Gainshare, while there’s zero mention of this for Contract 3.

      we will be in danger of double accounting public funds and under-counting effective BT contributions

      Sadly if this danger exists then it comes from the failure of both BT and local authorities to correctly apportion / detail the make-up of their funding allocations in related press releases and documents.

      I’ve seen quite a few PRs where clawback linked funds are presented as new funding, which is often only spotted later when incidentally digging deep inside council meeting documents.

      Politicians of course don’t care as anything that makes the funding look bigger than it is works for their publicity needs.

    • Steve Jones

      As you say, it would be much better if all these projects presented their accounting in a clear and consistent manner. Unfortunately every BDUK project appears to present it differently and, as you say,

      The only way that I’ve been able to work out how much (net) money BT has received is to go through all the relevant financial reports noting the net grant contribution rather than the gross as the accountants recognise a future liability and make it a deferral element in the balance sheet. Of course they will have received the cash, but that will get used up on later phases as its reinvested or returned at the end of the contract period.

      I do wonder why BT (or OR) don’t do all the sums for us, but I suspect that they might prefer not to tread on the toes of the politicians and government operatives who prefer to put their own spin on the situation, such as giving the impression that the later phase spending is all new money.

      In any event, there was once fairly wild talk by MPs on the PAC that BT were in receipt of £1.7bn public funding (possibly by Grant Shapps too). The Guardian also got in on the act :-

      “Previously taxpayers footed a £1.7bn bill to put fibre optics between local exchanges and roadside cabinets across a quarter of the country where BT said it was not commercially viable.”

      https://www.theguardian.com/technology/2017/jul/29/bt-high-speed-broadband-rural-homes

      My calculations from the published accounts up to June 2017 are that there has been a gross total of £1,038m capital grants with a net figure of £607m after deferrals of £431m. There is no way to distinguish between the various phases of BDUK contracts at this level, but I assume that later contracts are modelled on the basis of a 39%, not 20% takeup so, presumably, deferral will be much less in the future.

      Note that some of the capital grants may include some elements of non-BDUK projects like the one in Cornwall.

    • There is no gainshare funding included here.

    • MikeW

      I think the local government politicians are actually incentivised to count the gainshare money as new investment … because it seems to get counted as the local authority’s match funding for the next BDUK central installment.

      That seems to get the county off the hook for seeking new match funding … so of course they’re going to take it.

      In this case, then, it would be strange for CSW to label those funds as belonging to BT!

      @steve
      I look for the funding details in the same way. Reference to the £1.7bn is lazy journalism from people that didn’t bother to use their GCSE maths skills … but it isn’t helped by no-one centrally collating the figures.

    • GNewton

      @Mark Jackson: Quite often a simple request under the Freedom of Information act will reveal the real details. However, too may times local authorities refuse to comply, hiding behind commercial confidentiality clauses. This lack of public scrutiny can result in strange figures for fibre deployment projects, and can also be an obstacle for private network building competitors.

  2. NGA for all

    Nice to see FTTP-in-Fill emerging. It would be so much better if Ofcom’s modelling on the WLA price control help establish a uniform level of investment for copper gain solutions and full fibre investment.
    The excesses of the Framework pricing (conservative bidding) being translated into the virtues of ‘clawback’ needs to seen for nonsense it is, but at least a combination of the various audit functions and these clauses have tempered the greed.
    This does not change the small matter that of the £463m clawback, only £130m has been released for more coverage. The rest is resting in BT’s accounts.
    Fully understood, the B-USO needs delaying until BDUK activity is completed.

    • Steve Jones

      The government has a 2020 target for the USO, so it can’t be delayed that much. As for the deferral money being taken up, that is simply down to how fast contracts are signed for new phases and the rate at which funds are drawn down as credits against the grant elements for those. It also depends on the resources available for planning and deployment.

      One option that local BDUK projects also have is to sign contracts with alternative providers knowing that they will receive the gainshare money when the contracts complete their term.

      In any event, your claim that it is fortunate that the BDUK contracts were structured with clawback does little credit to those who designed it that way. If it had been a fixed-price contract, then the initial costs may well have been lower for any given number of locations but it seems very likely that eventual coverage would have been less.

      Credit where credit is due. The framework was designed this way. It was not an accident.

    • NGA for all

      Credit indeed, but do not overplay it. Scrutiny of it shows as much gaming as any other number. It will be interesting as to how long it will take the remaining £333m plus interest to get converted into coverage. The location of the LA Investment Funds containing the capital balances also need disclosing.

      The B-USO as described by DCMS is a retail proposition (contention rates, data caps), not something Openreach can in theory respond too. Ofcom could not model LR-VDSL because it is not available. So much to do to make sense of the Parliamentary wash-up.

      B-USO would use the same resource as BDUK so which takes priority? Nothing to stop USO being applied in stages when BDUK declared complete. Isle of Wight 99% coverage needs no uplift in the WLA price control.

    • Steve Jones

      @NGA

      It’s clear nonsense to say that OR can’t respond to the Broadband USO consultation just because they aren’t a retail operator. OR can make a proposal based on a wholesale provision to all service providers in exactly the way that they carry the USO obligation for provision of a line (outside of the Hull & Kingston area of course). It would then be up to the service providers how they present that at a retail proposition just as they do for voice.

      Of course Ofcom and the government may not wish to accept this proposal, or they might want to amend it, particularly as there are a few strings attached such as LR-VDSL2 usage at least on a selective basis (OR are heavily restricted by regulation on the level of technical freedom they have on the copper network). It may be they will have issue with going beyond 10mbps with the proposal. It may be that they have something completely different in mind as a market model. But that OR proposal is perfectly valid, and anybody or any organisation can respond to the consultation, even if they’ve no intention of making any such offer themselves (as several of BT’s competitors have made).

      Of course the ability for OR to do this is greatly enabled by the existence of the BDUK infrastructure, and it is entirely in their interests that infrastructure is extended as far and as far as possible. It makes for a much smaller gap to fill, makes it cheaper to fill it and (assuming the BDUK reinvestment money was invested with OR) more likely that only OR will be able to do it cost effectively.

      So, by all means OR will ways. Let’s wait until all the BDUK reinvestment money is spent (or at least put into planned projects). It’s entirely in their interests.

    • MikeW

      “Gaming” is an interesting accusation. On the face of it, it would only work if a company’s “gamed” bid for the work was done in the sure-fire knowledge that it would win the contract; otherwise a company would leave themselves open to being (easily) outbid by a competitor.

      That circumstance was true by the end of BDUK bidding, but it certainly wasn’t true at the start. And central BDUK were ever-present to ensure that the bids were based on similar cost basis throughout.

      How did BT manage to both game the system and win those first bids?

      Or was everyone trying to game the system equally, to derisk the venture, rather than trying to win the bids?

    • NGA for all

      MikeW – Simple. Fujitsu, no core network, no access network, no wholesale platform, no customers.

    • MikeW

      I wonder why @NGA thinks that the WLA review would do anything whatsoever about fibre costs, charges or investments.

      As I see it, Ofcom’s interference/regulation really only works when it can evaluate LRIC on long-term assets, and apply “efficiency” ideals to a long-term, stable, installed base.

      The LLU bodge, after all, was a sticking-plaster solution that assumed the access network was a stable, unchanging place.

      Can Ofcom really hope to specify anything, when BT is still trying to figure out what its deployment characteristics are for FTTP? In a meaningful way, anyway?

    • MikeW

      NGA
      That doesn’t really answer the question. BT still had to bid sufficiently well to make sure they beat Fujitsu. And others in the pilots.

      Fujitsu didn’t necessarily need a core network or customers … they had backing from, IIRC, VM, TT and Sky didn’t they? Who have/had both elements. The subsidy was all about the access network element.

    • NGA for all

      Steve, Indeed OR can only make a partial response saying it can supply some of the components needed to support a retail B-USO as drafted.
      For the telephony USO, with the advent of LLU, meant the metal path had to be defined. This defined OR responsibility, the supply of functioning metal paths.
      For a Broadband USO a similar reduction is needed, – a metal path overlayed with the limitation of copper gain technologies (MPCG) and or the provision of a fibre path where MPCB fails to deliver what is required.

    • NGA for all

      MikeW – WLA definition includes FTTP as equivalent to copper but does not establish the basis of reasonable demand (placing an order) for a direct fibre connection. If the process of establishing reasonable demand for direct fibre access is progressed or defined then yes WLA could play a substantive part.

      I think the latter could be established by accepting a volume forecast for FTTP and any incremental costs associated with supporting the ‘reasonable demand’ associated with the volume forecast.

    • NGA for all

      Mike W To answer the Fujitsu related. North Yorkshire was the last bid (pre Framework) where Fujitsu partook. After joining the Framework, they made no bids. All you need to do is compare BT’s capital offer on North Yorks and compare to the previous bids on a per premise basis. If there was any perceived competition the contribution would be expected to rise. This was not the case.

  3. NGA for all

    MikeW – North Yorkshire was the last bid (pre Framework) where Fujitsu partook, after joining the Framework, they made no bids. Was the BT’s capital less or more per premise than the previous bid?

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