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No Gigaclear Deal Yet But Devon and Somerset Get Extension to 2023 UPDATE

Monday, March 18th, 2019 (12:01 am) - Score 2,519
connecting devon and somerset uk logo map 2016

The UK Government has officially backed a bid to extend £18.7m of public funding so that it can be used to further extend “superfast broadband” (30Mbps+) in Devon and Somerset up to March 2023, which follows various historic and recent delays to the project’s roll-out plan. Sadly they’ve yet to resolve the Gigaclear situation.

Over the years the Connecting Devon and Somerset (CDS) project has sadly become somewhat better known for its delays than its successes. First there was the c.2 year delay that followed the 2015 collapse of their attempts to secure a Phase 2 “fibre broadband” (FTTC/P) contract with Openreach (here) and more recently a similar delay has afflicted their new Phase 2 contract partner, Gigaclear, which signed the follow-on contract in 2017 (here).

The original contract required Gigaclear to build an entirely new 1Gbps capable Fibre-to-the-Premises (FTTP) network, which would cover 41,000 rural homes and businesses across various parts of the two counties by the end of December 2019 (excluding the ISP’s separate commercial build). This was later extended to June 2020 following Government approval to expand the network to a further 6,810 premises (total of 47,810).

All appeared to be going well until October 2018, when it was revealed that Gigaclear had fallen “significantly behind schedule” (in some areas by as much as 2 years) due to “fundamental issues,” not least including a lack of operational capacity, poor decision making within the ISP, slow deployment by contractors, a lack of detailed planning and a failure to redesign the build methodology (here).

In response the local authorities put Gigaclear on notice of a possible default and withheld further payments, while the ISP’s new owner, Infracapital, made significant changes in order to correct for the mistakes and proposed a revised roll-out plan that would delay completion until June 2022 (the revised roll-out plan still hasn’t gained approval from CDS).

However such a long extension required funding approval from the Government and this has now been secured, albeit seemingly with an even more delayed completion window to March 2023.

Councillor David Hall, CDS Board Member, said:

“The decision by DCMS to back the bid to extend the broadband funding spend-by deadline is a huge boost to our economy and rural communities, and a vote of confidence in the CDS programme.

In recognition of representations made by DCMS and CDS, I am delighted there has been a positive response from HM Treasury which is finalising an agreement for the funding extension with DCMS subject to the Spending Review process.

The effect of such an extension will be to provide CDS with the flexibility to either agree an acceptable revised timetable with Gigaclear to complete a new ultrafast full-fibre network or for CDS to pursue alternative full-fibre solutions for our residents and businesses.

CDS is agreeing similar support from other funders. Whilst every effort to resolve the situation with Gigaclear is being made, CDS is also working with DCMS and the Heart of the South West LEP to consider alternative options and develop a Digital Strategy for the area.

We are grateful to Digital Minister Margot James and her team at DCMS with whom we’ve been working closely, to Liz Truss, Chief Secretary to the Treasury, and to Rebecca Pow, MP for Taunton Deane who has played an important role in co-ordinating the support of Members of Parliament. CDS has also benefited from the strong support of local authorities and LEPs.”

So far CDS has provided access to “superfast broadband” to more than 300,000 additional premises, often in sparsely populated rural areas and over challenging terrain. A further 38,000 homes and businesses have also benefited from improved broadband speed (i.e. not included in the 300K above because they don’t quite achieve superfast speeds but have been upgraded). This is mostly due to Openreach’s Phase 1 contract work.

When the above is combined with commercially-funded networks in the two countries there are, together, over 950,000 homes and businesses across Devon and Somerset now with access to superfast broadband out of a total of 1,083,000 premises currently. You of course have to order such a package from an ISP in order to benefit.

Just for some context, Gigaclear has so far committed to investing £60.5m in the public programme, which covers their 47,810 premises FTTP roll-out and is supported by £31m of public sector subsidy. The ISP is also investing a further £67.3m to connect an additional 43,000 premises under their separate commercial roll-out in the two regions.

Despite today’s news it’s clear that the company “remains on notice of default” and “pending a satisfactory outcome” CDS is still withholding public subsidy. Gigaclear is thus continuing to build the network in the CDS area at its own risk and expense.

Both the Government and CDS are continuing to demand that the ISP provide key reassurances, particularly regarding capacity and acceleration of deployment. On top of that they’re seeking “acceptable plans for each contract area backed by fully costed analysis of the network delivery options and await further information from the company.”

Meanwhile the take-up rate for all CDS-funded services currently stands at 54% and is said to be “generating significant resources for reinvestment” thanks to the gainshare (clawback) agreement with BT (Phase 1 contract). The latest information states that £6m of public investment will soon be returned in order to help Openreach (BT) boost “superfast broadband” coverage to a further 2,000 premises in the hardest to reach areas.

Apparently CDS will provide full details once the final gainshare plans have been agreed with BT and DCMS later this year. Further funding could be returned like this in the future up until 2024. We should add that CDS also has a contract with wireless ISP Airband, which is working to bring superfast broadband to around 21,000 premises across the two counties.

One final point to make is that CDS will finally be joining the Government’s Better Broadband Subsidy Scheme, which is being launched next month (April 2019). Any home or business with less than 2Mbps and not part of planned deployment from another provider should be able to request a voucher worth up to £350 to help cover the installation costs for a faster connection.

UPDATE 19th March 2019

Gigaclear has also issued an apology for the “delays in the delivery of the full fibre network across its contracted areas in Devon and Somerset” (here).

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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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19 Responses
  1. Avatar CarlT

    Wowsers. Nearly £2k per premises passed for the subsidised properties and over £1.5k for the commercial segment.

    Openreach are spending about £300 per premises passed on Fibre First, Vodafone £500 on their venture with CityFibre.

    Hyperoptic it’s about £170 per premises passed.

    Not hard to see why, even with the extra competition, the cities tend to make more financial sense.

    • Vodafone aren’t providing much of any investment on the £2.5bn Cityfibre build. The funding for that comes largely from Cityfibre itself.

    • Avatar Meadmodj

      Presumably Vodafone are underwriting their investment though by committing to a certain market share

    • Avatar NGA for all

      Setting budgets of £2,000-£5,000 where the actual comes in at much less, is no different to pretending cabinets were costs £50k-£100k each, only for phase 1 average to be reported by BT at £26k.

      Anyway these should be averaged with that which has gone before.

    • Avatar TheFacts

      @NGA – averaged how with what exactly? For different locations?

    • Avatar NGA for all

      Facts, this is BT’s average cost per cabinet for all of phase 1 as submitted to the CMS Select Committee 2016 – written evidence. Ask questions of BT, it is their number!

    • Avatar CarlT

      I’m not sure how averaging what has gone before, delivered by other operators, would be relevant to either Gigaclear’s commercial deployment or their BDUK subsidised one.

      The costs mentioned in my post are about normal for Gigaclear nationwide. Most private sector commercial operators don’t have the luxury of soft digs via free wayleaves. It gets expensive rapidly going through pavements and carriageways even with some verge to balance them out.

      A simple way to consider it would be to look at the costs in urban areas, consider how much of that is based on distance then rate population density in rural and urban areas.

      A quarter the population density implies 4 times the variable costs due to the need to dig 4 times farther to pass each property.

      Obviously a gross simplification but you get the idea. Operators aren’t making things up when they claim such costs for areas like those Gigaclear are passing.

  2. Avatar Graham Long

    It has taken DCMS nearly six months to support the request that CDS funding for their Phase 2 roll out should be extened to March 2023. (NB this is not additional funding, but simply an extension of the peiod over which it can be spent). It is now for HM Treasury to agree to provide funding over that period, and if MH Treasury work as fast as DCMS it seems that the funding extension may be confirmed in Sept 2019, a full year after Gigaclear’s five contracts were put on hold. Meanwhile rural Devon & Somerset tax payers in 218 of the 248 Gigaclear build areas are told that their fast broadband connections are “to be confirmed” and CDS make it very clear they are still considering cancelling the five CDS contracts with Gigaclear completely, saying “The effect of such an extension would be to provide CDS with the flexibility to either agree an acceptable revised timetable with Gigaclear to complete a new ultrafast full-fibre network or for CDS to pursue alternative full-fibre solutions for residents and businesses.” The current contract extension delay is of course additional to the two year delay already created by CDS abandoning the two Phase 2 tendering rounds they ran long before they awarded the five Phase 2 contracts to Gigaclear at the end of 2016. I am begining to think that Brexit will be resolved long before 47,800 rural Devon & Somerset residents get the fast broadband that CDS promised them in 2012. (Yes, 2012!)

    • Avatar New_Londoner

      It’s hard to understand why heads haven’t rolled within the council and that councillors haven’t resigned.

    • Avatar NGA for all

      Gigaclear and BT are facing the same resourcing issue for full fibre. BT should also benefit from the 2023 date, as it will monies owed to be reinvested.

      I am not sure why the costs are not averaged.

      It is good the money has not been lost to the process.

    • Avatar Graham Long

      @New_Londoner. Somerset CC are in charge of CDS contractual issues (Devon deal with operational issues) and SCC will tell you they (CDS) cannot agree a contract extension with Gigaclear unless that have back to back guranteed funding from DCMS. In turn DCMS cannot approve (as opposed to support) a contract extension unless they have guranteed funding from the Treasury….. and after 6 months the Treasury are still not prepared to guarantee funding during the contract extension up to 2023. They have however committed £2Billion of spending on Brexit no deal preparations!

    • Avatar Joe

      @New Londoner: Councillors resign! That will be a novelty.

      NGA is correct on resourcing issues for fttp. I’m not sure there is much to gain from cancelling the Gc contract as the time lost for a new contract will probably add as much delay as leaving them as they are and cost extra.

      I do find it hard to understand given the time that we don’t have a CDS/Gc updated proposal now.

  3. Avatar A_Builder

    @Joe

    I agree with you.

    Personally I doubt cancelling the contract would have achieved much as all of the same issues would have to have been overcome.

    Not least the disappearance of the Eastern European workforce caused by something else going on in the background…….who’d have thunk it?

    Given the heat everyone got from handing most of BDUK to OR on a plate then using alternatives was pretty heavily pushed. And OR often didn’t cover themselves in glory with comms etc being appalling. Maybe also those administering the scheme were sick of OR. Who knows this has not be transparent which it should be given the level of public money involved.

    With respect to NGA for All, I don’t see how a contractor can work on an ‘average costs’ basis when particularly in rural real costs vary all over the place. That is a recipe for Carillion/Interserve replays getting involved in taking on unquantifiable risk.

    There is a general dystopia regarding how risk works digging holes in the ground: it isn’t nice work, it is risky and the margins are not amazing at the best of times.

    At the end of the day most of the cost of this is about digging holes not fusing/terminating fibres which has a much more predictable cost basis.

    • Avatar Joe

      I think the heat was fair enough. Like so many gov contracts the system seemed designed in such a way as to exclude all but the biggest player(s); in this case BT won because the system made it all but impossible for almost anyone else to win. The later bduks were better.

      While from a cost simplicity basis getting bt/or to build the whole UK would have been the easiest/cheapest it would never have passed EU rules nor been desirable in the long term. It would prob have necessitated BT/OR being broken up (even multiple ways) to restore a diverse market.

      Rural fttp can be a guesstimate as you say. BT using poles have a better cost guide (even allowing for higher weight loads) Gc buried fttp is a better long term solution and eventually lower cost/faults (though my neighbours without their phone/bb on an off for days might not agree!) but in the short term its very hard to cost build in differing ground conditions.

    • Avatar NGA for all

      A-Builder, it is not so much the contractor but those writing the business cases. The £1.7bn subsidy was not for 90% or 95% but to do as much as could be done including FTTP in-fill. In business case terms we should be averaging costs rather than punishing those having to wait the longest and for whom the intervention was designed.

      Nobody should be referencing ‘savings’. None can be claimed until the job is complete.

  4. Avatar Guy Cashmore

    Still no explanation of how the B-USO will be dealt with in the delayed Gigaclear areas, it creates legal rights from the end of 2020 that can’t simply be dismissed, I can see some overbuild being inevitable as things stand.

    • Avatar Gadget

      I can see some “wiggle-room” being created in the doc here https://www.ofcom.org.uk/__data/assets/pdf_file/0013/115042/implementing-broadband-uso.pdf where it states
      ” a broadband connection that meets or exceeds the USO specification is not available (from any provider) at their premises or will not be provided by a publicly-funded rollout scheme in the next year;
      and
      where the cost of building a USO connection is up to £3,400. Consumers and businesses will be connected if they are willing to pay any costs over this limit. ”

      either it will be coming in the next year (cheque is in the post)
      or
      “Sorry the cost will be £50k so please pay £46.6k connection charge”, unless some form of demand aggregation is allowed.

      Still with a potential publicly funded rollout stretching into 2023 I can see a temptation to extent the first “get-out-of-jail” proviso.

    • Avatar AnotherTim

      @Gadget, I agree, USO is effectively worthless other than as a political soundbite. IMO very few premises without broadband meeting USO within a year will have a build cost of less than £3400 – that’s why they haven’t already got such a connection.
      I know some people are expecting to get an upgrade through USO, but I think they will be disappointed.

  5. Avatar FibreBubble

    The smart money gets out of the bubble at the right time. The Prudential look to have bought in at the wrong time and are left holding the Gigaclear baby..

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