UPDATE Aylesbury Vale Opposition Leader Criticises Broadband ISP Sale to Gigaclear
The Group Leader of the Liberal Democrats, Anders Christensen, has accused the Aylesbury Vale District Council in Buckinghamshire of trying “falsely portray” the recent sale of the rural FTTH based Aylesbury Vale Broadband network (assets) to UK ISP Gigaclear as a success story.
Officially AVB was supported by around £700,000 in the form of a publicly funded commercial loan from AVDC (extracted from a fund of £1.536m), which itself acted as a 95% shareholder (most of AVBs directors work for the council). Until the sale (here), AVB claimed that it had been steadily building the network out to serve around 2,000 premises in several villages.
Naturally most of the people behind AVB have nothing but good things to say about the effort, which is despite a stream of criticism from opposition councillors, a number of overbuilding or competition challenges (examples here and here), concerns over financial stability, technical problems with the network (took awhile to resolve) and issues with the slow pace of deployment.
In fairness building a FTTH network into rural areas is no mean feat and AVB clearly had noble intentions towards reaching rural parts of the vale. Sadly the level of secrecy around the project’s funding, sale and actual progress hasn’t always made it easy to write about. Each side of the council seems to accuse the other of misleading the public in some way and in both cases the road block of confidentiality makes it hard to verify fact from fiction.
Councillor and AVB Director, Janet Blake, recently said that she was “extremely proud of the success Aylesbury Vale Broadband (AVB) has achieved in delivering high-speed broadband to rural villages in the Vale that otherwise had no realistic likelihood of being connected by other providers” (here). Meanwhile the opposition take a different view.
Anders Christensen, LibDem Councillor, told ISPreview.co.uk:
“I am disturbed by the press releases put out by the Council in relation to the sale of AVB. Cllr Janet Blake continues to falsely portray AVB as a success when information released to a handful of councillors (we have been gagged so we can not publicly share it) clearly demonstrate the false nature of Janet Blake’s comments.
She insists on saying AVB connected 7 villages but this includes Oving and Drayton Parslow which, while having fibre laid to the edge of the village, did not connect a single subscriber.
The council also trot out the line that AVB serve around 2,000 premises in several villages. As noted I can’t divulge the actual number of subscribers but suffice to say it’s a fraction of the 2000. Only 1/3 of the people who paid deposits to get the service from AVB were ever connected.
It’s great news that broadband services to the effected villages will finally be run by a professional company and I am hopeful that they will finally receive the service that AVDC falsely promised them two years ago. While I have not seen the details of the sale yet I can say that even the most optimistic view before Christmas is that the council would still loose a substantial amount of money as the selling price would be less than the money ploughed into to AVB. “
It’s worth pointing out that the reference to 2,000 premises is a reflection of coverage and appears to have been wrongfully conflated with take-up above, which requires a different measure of success. Even in rural areas take-up often requires time to grow and we know a fair few FTTP/H providers that initially aim for around 20-30% take-up. The original take-up assumptions for the BT / BDUK programme were even lower but today stand at around 39% of total homes passed.
Sadly the secrecy means we can’t easily verify how well AVB has done. Similarly Anders has previously claimed that AVB “[ran] out of money” and gobbled £1.3m of investment (well above the £700k touted in previous public documents), although once again we cannot verify who is telling the truth because of the frustrating confidentiality and counter claims by bitter political opponents.
A review of the AVB scheme, which will be conducted by an external body and is expected to go through AVDC’s Audit Committee, is due to begin soon but there are already doubts about how much solid information about AVB’s financial situation, actual deployment or the Gigaclear sale will end up being released to the public. A recent council meeting (skip to item 8 here) helps to illustrate the challenge of confidentiality vs accountability.
UPDATE 9th Jan 2018
We’ve received the following comment from AVDC.
A Spokesperson for AVDC told ISPreview.co.uk:
“When AVB was launched in 2015 its aim was to bring high speed broadband to rural parts of Aylesbury Vale that couldn’t receive it. At the time, Connected Counties was not delivering in Aylesbury Vale and there were no other incumbent suppliers. Since launch, AVB has provided FTTH connections to customers in 7 villages (Granboroough, Hoggeston, Soulbury, Swanbourne, North Marston, Stewkley, Dunton), with fibre laid in two more (Oving and Drayton Parslow) that are still to be connected. The network coverage is circa 2000 properties but, as you correctly identify, that is not the take-up figure.
Arguably, as a result of AVB’s success other commercial companies have entered into the local market and one of them, Gigaclear, expressed interest and subsequently purchased the assets of the business. Gigaclear’s commitment to growing the network in Aylesbury Vale was a deciding factor in the decision to sell and the sale will enable the network to grow faster than it otherwise could, meaning more residents will have access to high speed broadband. Therefore, AVB has achieved its primary objective and can confidently be described as a success.
Unfortunately, due to commercial confidentiality we are not able to respond to comments about the subscriber base or commercial arrangements at this time. However, details of offer were shared with Cllr Christensen at a Leaders Meeting in November 2017 and the sale was supported unanimously by all parties at a General Purposes committee meeting of the Council on 30 November.
Finally, it is good business practice to undertake a review of businesses and to take the learnings forward to future ventures. In this instance, the Council approved a motion to appoint external auditors to conduct a review of the business and report their findings to the Audit Committee. This is very different to a ‘full independent inquiry’ referred to by Cllr Christensen in some of his media statements.”
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, Google+, Facebook and Linkedin.
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You have to ask how a company, where the overwhelming majority of shares are held be a local authority, can possibly hide behind a screen of commercial confidentiality whilst it was operating. I suspect that it’s now all tied up in confidentiality clauses with Gigaclear which will almost certainly not want revealed how much it paid for the business and how many customers it inherited.
However, I don’t see how the council can possibly hide any of the £700k “commercial” loan money that it might have to write off. In addition, it would be interesting to know where the rest of the money that AVB “gobbled up” was sourced. Was it from the council, or some other source, like a bank? If the latter, did the council provide any form of security? Indeed have the council provided any other form of security, for example to suppliers.
This always sounded murky from the beginning. At least with a direct public subsidy to a company the targets can be measured and the commercial risks passed on. Where the company is effectively owned by the local authority and the board is largely staffed by councillors and the whole thing is cloaked under commercial confidentiality, we seem to be in a world where there is an incentive to keep this from public scrutiny.
I also wonder if the structure of AVB, both financially and in terms of governance, is echoed in other councils, whatever the area of business. I’m probably naive, but I’ve not heard of anything quite like it in other areas (we did, of course, have the disastrous South Yorkshire Digital Region project, against which this one is just loose change, but it wasn’t a single authority essentially doing its own thing (several local authorities and central government were involved).
nb. was the full extent of the loss of public funds ever established on Digital Region? Some reports had the losses in the region of £100m, yet that scandal received very little scrutiny compared to BDUK which is at least providing benefit to millions of people.
Digital Region was of course only a project for South Yorkshire, not a national UK scale deployment like BDUK, so proportionally you’d expect the level of scrutiny to be far lower. However there was a lot of scrutiny at the time and I wrote quite a fair few pieces about it up until around mid-2014. History can be found by looking at related articles under the DR tag.
https://www.ispreview.co.uk/index.php/tag/digital-region
@Steve Jones: It’s easy to criticize the AVB project, and I agree with a lot of it. However, portraying other public subsidies like the BDUK as a positive alternative is a bit misleading. Anyone who has ever tried an enquiry under the Freedom of Information act will know why. Many local authorities tend to hide behind obscure confidentiality clauses!
At least Councillor Christensen is not letting this die. So there is a good chance that the truth will come out.
@Mark
BDUK is, of course, national but by any rational measure it was vastly more expensive on a per-premises level and a disastrous commercial failure. It rather demonstrated again that politicians are generally ill-equipped to deal with commercial and technical issues which are best delegated to industry experts. Despite this lesson I see over and over again other posters claiming the whole thing would be handled better if nationalised (rather than politicians sticking to what they should do – deal with policy and strategy issues).
It’s not particularly pointed at this site (which did cover the issue), but the way is seems to have been ignored by politicians and the national press who would rather go around beating up on BDUK when the direct involvement of many politicians (including national ones) were complicit in that disaster.
@GNewton
As for AVB, then listen to that council discussion, and go back and look at the history. It raised all the alarm bells from the beginning. It lacked transparency, it created a 95% council-owned company with clear conflicts of interests and roles by the way the board was set up. To anybody who has any idea of the real costs, it was clearly massively under-capitalised from the beginning for the ambitions it had. It seems to have taken in deposits for services it could never deliver and the level of initial financing appears to have been deliberately set to avoid triggering various national control measures which would otherwise apply. Despite this it seems clear that AVDC are in for a big bill – not just the £700K initial loan, but it seems the figure now is more than £1.5m and might even be more than that (reading between the lines). Have the council provided any security for other loans? Will it be the council that has to repay any deposits?
Watching the AVDC council, then there’s a clear closing of ranks in the local Conservative party by voting in an amendment submitted on the day of the meeting which effectively replaced the initial motion. That seems to have included votes by councillors who might well be called to account by any inquiry (apologies if I have that wrong, but I had that distinct impression).
I have an indirect interest – my mother is an AVDC council tax payer.
At least the ducts have been in place for a lot of the work so hopefully Gigaclear can now expand on this core infrastructure and get more customers connected. To what was a good idea by a council sadly one that struggled in vision.
Anyone who expects to hear a coherent, true and complete story when the people telling the story are self confessed politicians must not have much of a grasp on reality.
The initial loan of was unsecured, and, at £7.5% pa, payment deferred until due in full, with capital, after seven years. Two years in, £1.3m down (allegedly) – and then looking at just five years to find £2.5 million – with tons of work still to do. And that’s an achievement of which AVDC ‘are extremely proud’.
Having apologised for the ‘struggle’ customers were having with ‘low or variable speed connections’, she also claims the AVB network is one of the most advanced broadband infrastructures of any rural district in the UK.
Sarah Huckabee Sanders evidently now freelancing for AVDC.
I should have also said that the loan was eventually secured against AVB’s assets. A move that may have been prompted by the European Commission State aid complaint, which observed that one of the several reasons why the loan was not commercial was the absence of security. Other grounds for non-commerciality of loan was the fundamental unviability of the business, and a consequent inability to repay the loan. No bank or commercial lender would have provided such a loan on those (or probably any) terms. And if the loan wasn’t available commercially, that means it’s State aid, and if it’s State aid, i was improperly awarded.
@Roger – but if this is the case and the assets have been sold to a third party doesn’t this mean a) no loan security and b) AVB are now liable to repay the EU funding as well if it is deemed illegal State Aid?
They have, in effect, cashed in on their security – it’s just that it probably wasn’t worth as much as they wished, and will almost certainly be less than the amount they lost on the loan. If the EC decide that loan was in breach of State Aid regulations – and AVDC have done nothing to prove otherwise – the ultimate sanction is to require AVDC to repay the full amount loaned to AVB back the New Homes Bonus account. While the case may take some time to run its course, it will continue after Brexit (if not by then resolved), in the hands of Dept for BEIS. AVDC would do well to sit on the sale proceeds until the case is resolved.