The High Cost of Broadband for USO Excluded UK Communities

However not every community is going to be as willing to challenge such quotes as others and, when acting as an individual, it can clearly be extremely difficult to know whether or not you’re being treated fairly by BT. On this point there’s a notable lack of knowledgeable independent oversight (this too would be difficult since assessing whether a quote is fair or accurate can be tricky without engineers on the ground).

In fairness this is difficult for BT too and they’re still learning. Communities change over time and Openreach’s internal data isn’t always as accurate or detailed as we’d like. On top of that the USO was introduced just as the COVID-19 crisis was really starting to kick off, which created an additional headache due to limited resources (although they did have a year to prepare for it beforehand).

On the other hand, it’s not like BT’s quotes are all falling massively outside of the ball park (excluding a few extreme examples), as we can see when comparing against some of the other non-BT examples. Furthermore, it’s worth remembering that BT and KCOM were the only ones out of an entire industry that were willing to take on the high costs and legal responsibility of delivering the USO.

At this point we should mention that BT contribute toward funding the USO themselves, but Ofcom can establish a Universal Service Fund (USF) with the wider industry if they “find that there is an unfair net cost burden” being imposed on BT or KCOM due to its delivery (i.e. compensation for the USO operators). So far this hasn’t happened but, given the above quotes, we suspect there may be an argument for establishing the USF. “For the fund to be triggered, BT will need to submit detailed costs demonstrating the net burden of delivering the USO,” said the operator’s July 2020 financial results.

What do the regulator and BT say?

We raised some of the key points from our investigation above with Ofcom and BT. In response a spokesperson for the regulator told ISPreview.co.uk that they were “concerned about the high amounts BT has quoted some people … particularly where connection costs could be split across a number of homes in an area. We’ve raised this with BT as a matter of urgency and expect it to take action.”

Ofcom added that, under the USO, BT are required to take due account of the extent to which costs may be shared by multiple locations (i.e. demand aggregation). However, as we’ve seen above, the quotes don’t always seem to make much sense and end up causing confusion (e.g. one moment it’s £30k, but for others in the same area it’s £12k and in some cases this has later become free etc.).

The regulator clarified that, “while each quote has to be sent to – and paid for by – an individual rather than a collective, BT’s costs (whether above or below £3,400) should be calculated and shared according to the demand aggregation model (which effectively assumes that sharing will take place), rather than lumping all shared costs into individual quotes.”

A BT Spokesperson said:

“The common theme in these cases appears to be driven by the fact that the current USO process seeks to maximise the efficiency of USO build by “clustering” potential USO customers onto a single fibre splitter where possible. Therefore when we receive a single request for USO we will seek to build a splitter based FTTP solution that addresses that customer and other USO customers in the same area.

We will contribute the USO funding threshold of £3400 to the costs for each potential USO customer addressed (subject to an Ofcom agreed take up assumption of 70%) in order to calculate the excess cost over and above the USO contributions, and that total excess cost bill will be presented to the customer who requests the service, and similarly other customers on the same cluster will receive an equivalent bill until it is accepted by one of them.

Once a customer accepts the bill then the structure is built and all users on that structure benefit with no additional build cost. Therefore in the first case of multiple similar but different quotes in Pandy this appears to be customers on multiple clusters receiving quotes to build their particular cluster, and in the case of the Brentor case the cost of the cluster build (once USO contributions have been deducted) would be £42,00 and once this is paid the structure would be built and all customers on the structure receive the benefit at no additional cost.

We are also looking at alternative approaches to sharing these excess costs amongst more of the potential beneficiaries rather than just the requesting customer with Ofcom, however the USO process isn’t currently set up to accommodate this type of request but we are working with Ofcom to find a solution where it can be possible but without the risk of BT incurring costs which it cannot recover.”

BT also pointed out that Openreach had recently improved their costing model for the USO and as a result of that they have been able to lower the cost to some customers who received quotes under the old model. “This has been achieved by sharing build costs across more premises than we initially thought. This meant that the revised quotes were much lower and in some cases, as you highlight here, were actually free,” said BT (all affected customers are said to have been contacted directly about this).

Moving on to the subject of complaints (ADR) about the USO process, Ofcom noted that the ombudsman “can only rule on whether BT have followed the proper process when providing their quote” and will not be carrying out their own costing exercise to independently verify it. BT also clarified why they had attempted to reject some complaints.

A BT Spokesperson said:

“We became aware of a number of instances of this type of issue, on investigation they appear to have been caused by customer enquiries being handled by the normal BT Consumer teams rather than the dedicated USO teams. Our normal BT Consumer team process requires a BT customer account in order to progress.

This resulted in some failures as you have highlighted here. We have made changes to the process to direct USO issues to a dedicated USO complaint route that should have now resolved these issues.”

As for the issue of who pays, such as when somebody agrees to proceed (i.e. pay the proposed excess costs in the quote) and then the final price increases again, the regulator’s view is that “if the customer does not want to do this, BT can remove eligibility” (i.e. you may walk away with nothing but also no surprise bill to pay). Generally, Ofcom said that BT should deliver the build based on the agreed excess costs.

Ofcom’s spokesperson concluded:

“We’re continuously monitoring how the USO is going, to make sure it’s delivering the desired benefits for customers. As mentioned above, we’re concerned about the information some people are receiving, which we’ve raised with BT.”

We also raised this same issues with BT.

A BT Spokesperson said:

“This “cost of building may increase” letter should only have been sent to customers who were below the USO cost threshold and thus were eligible to receive the USO build without incurring additional costs. In that case though there is a risk that actual cost, when we come to build the solution are more than the USO threshold. In that case, we will seek to continue to build up to a cost of double the USO threshold (i.e. £6,800) at our expense.

However in the event of unforeseen costs beyond that we would then go back to the customer and offer them the option of paying the additional cost or halting the build at no charge to them.”

Finally, we asked BT why their quotes failed to name the broadband technology that would be delivered (FTTC or FTTP etc.). A spokesperson for the operator said, “Generally this will be via FTTP, however the USO regulations require us to build the most efficient solution that delivers the USO … In some cases the USO specification may be achievable via other technologies such as an FTTC solution. As a result when we build new fixed infrastructure for USO we cannot guarantee that it will be FTTP, though in practice we expect it will be in most cases.”

As much as we agree with BT’s viewpoint on this, it still doesn’t entirely explain why the operator can’t include this information on their quotes. After all, by the time a quote has been issued then the operator must have already know what technology is best to use.

Conclusion

Overall it’s hard not to see the USO as being a bit of a disappointment, which is partly down to its minimum speed (note – a faster speed would have created various complications with competition, high cost and potential delivery delays), and the fact that Ofcom allowed the use of highly variable 4G mobile technology alongside fixed fibre-based methods. Making the USO faster also wouldn’t solve the existing issues with delivery (if anything, they’d get harder).

The fact that the Government kept promoting the USO as a solution for everybody – those missed out by their other superfast and gigabit broadband programmes – certainly hasn’t helped. In fact, neither does that word “universal,” which in both cases served to create an unrealistic expectation of faster broadband speeds at no extra cost for all of the hardest to reach locations; even though it clearly can’t deliver this for everybody.

One final point to make is that, if anything, the USO situation is helping to demonstrate just how expensive it really is to connect-up those who fall outside of the cost threshold and also how difficult it is to accurately cost such work. Even if we correct for some of the issues with BT’s quotes, such work will still be incredibly expensive to complete via fixed lines in remote areas, which is an unavoidable reality.

As it stands the UK Government has stipulated in its legislation (Digital Economy Act 2017) that the definition of the USO speed should be reviewed when at least 75% of premises in the UK subscribe to a broadband service that provides a download speed of at least 30Mbps. Last year’s Connected Nations 2019 report put this figure at 59% (i.e. we don’t think it’ll hit 75% this year, but we’re getting much closer).

Going forward it’s hoped that the Government’s plan to invest £5bn to help get those in the final 20% of UK premises hooked-up to a gigabit-capable broadband service (here) will also help to tackle some of the aforementioned areas. Meanwhile Scotland’s R100 programme (here), the Welsh Government’s Phase 2 deployment (here) and Northern Ireland’s Project Stratum (here) should also help.

Remember, if BT or KCOM decide you are not eligible for the USO, they should tell you about your right to challenge this decision and they should also tell you how you can complain (even though complaining might not make much of a difference).

Ofcom Statement on USO Complaints

Customers have free access to alternative dispute resolution schemes. They will help resolve your issue if the complaint remains unresolved after 8 weeks, or sooner if deadlock has been reached with BT or KCOM. You do not need to be an existing customer of BT or KCOM to dispute an eligibility decision.

Although Ofcom does not investigate individual complaints your help in highlighting problems plays a vital part in our work.

You can complain to Ofcom on our website, or by calling us on 0300 123 3333 or 020 7981 3040.

If you wish to speak to us in Welsh, please contact our Welsh language line on 0300 123 2023.