Openreach’s Letter to Northern Ireland Council Draws Criticism

Openreach (BT) has faced some criticism after it sent a letter to one or more of Northern Ireland’s (NI) local authorities, which appeared to suggest that the operator would have provided FTTP broadband to more premises than the winner of the £165m Project Stratum contract, had they won it instead.

Last year saw Fibrus beat Openreach to scoop-up the aforementioned contract (here), which will in turn require them to extend their gigabit-capable Fibre-to-the-Premises (FTTP) network to an additional 76,000+ premises. The intervention area reflects some of the hardest to reach premises, which were not previously expected to benefit from such connectivity as part of any commercial plans (i.e. they required state aid support).

Despite this, several sources recently informed ISPreview.co.uk that Openreach had sent a letter to a local council in Northern Ireland, which appeared to suggest that they could have built more FTTP had they won the Project Stratum contract instead. But some of the information given appeared to have been conflated with the operator’s separate commercial deployments.

According to our sources, the operator now seems to be indicating that they may commercially deploy their own full fibre network to c.20% of the premises under Stratum, which is despite previously requiring state aid to do them as part of their own contract bid. Suffice to say that some of those affected have expressed concern that such letter(s) may “undermine” the otherwise positive work being done.

A Department for the Economy spokesperson told ISPreview.co.uk:

“The Department for the Economy (DfE) is aware that Openreach has written to a local council, stating that it would have provided a broadband solution to more premises if it had been successful in winning the Project Stratum contract.

The tenders for Project Stratum were evaluated against a broad range of criteria, based on established Invitation to Tender templates developed by Building Digital UK (BDUK), adapted for Northern Ireland under an open procurement using the restricted procedure.

The criteria encompassed multiple aspects of tenders submitted against Financial and Technical specifications, including Financial Model, Commercial Sustainability & Viability, Solution Design Quality, Wholesale Network Design, Wholesale and Retail Pricing, Implementation Plan, and Contract & Stakeholder Management, with scoring principles based on the same BDUK template documentation and aligned to guidance set out in the National Broadband Scheme (2016), with State aid Assurance provided by BDUK.

Both DfE and BDUK remain satisfied with the procurement process, which was also Gateway reviewed and judged to be sound.”

We should say that it’s not uncommon for evolving commercial investments to have an impact on proposed public intervention areas and sometimes vice versa, particularly if a lot of time has passed since the last Open Market Review (these are used to identify future coverage plans and thus which areas may miss out). But at the same time the contract award under Project Stratum only occurred a few short months ago.

Openreach are also known to remove premises from their subsidised build programmes when it becomes clear that they’re going to be upgraded via other commercial investments. Equally we’ve seen some past examples where that doesn’t always happen as effectively as it perhaps could or should (e.g. overbuild in some of B4RN’s planned areas).

Despite this Openreach remains adamant that it never undertakes subsidised work that it could deliver commercially.

Mairead Meyer, Director of Openreach NI, said:

“Whilst we were disappointed with the outcome of the Project Stratum tender, we believe wholeheartedly in the aims of the project to bring better broadband services to Northern Ireland’s hardest to serve areas. Our commercial investment has already made NI the most digitally connected region in the UK, and our Full Fibre network build here is on track to reach 525,000 premises (60% of NI) by March 2021.

As we said at the time, missing out on Project Stratum doesn’t impact our existing build programme or future ambitions for NI, and our priority is still about upgrading as many homes and businesses here as possible. Like other network builders, we regularly share our commercial build plans with public bodies throughout the UK, to help them target funding at the areas’ most in need of public subsidy.

We also publish our plans at least a year ahead of build commencing, on a quarterly basis, via our website. In that context, we’re working closely with the Department for the Economy to deliver the best possible outcomes for people in NI, and we wish them every success with Project Stratum.”

Openreach is currently still building FTTP across N.Ireland at a rate of over 3,500 premises passed per week, but they also don’t intend to stop at 60% in March 2021 (here). As such there is now a question mark over how far they will go and how much of that, if any, might overbuild into the Project Stratum areas. But this is where things can get a bit more complicated.

Such overbuild, if indeed it does occur to a significant degree, may well cause anger among politicians who are busy investing public money to help upgrade some of the most challenging areas (note: limited overbuild at the very edge of a network isn’t always avoidable and that is well understood).

On the other hand, the DfE may also see an opportunity to negotiate a change to the Stratum contract so that their funding can be used to expand coverage elsewhere, while leaving some bits to Openreach. But this would be difficult if any areas being eyed-up by Openreach risk harming the business case put forward by Fibrus and it doesn’t take much to cross that line.

In any case the relevant State Aid rules say you run an Open Market Review, then a Public Consultation and then within 6 months – but typically less than that – any commercial overbuild from a contract placed under that procurement is protected by a line in the sand principle. Openreach have benefited from this in the past when challenged by rivals wanting to do a commercial build, but now the shoe may be on the other foot.

Alternatively, if you’re a consumer, then the idea of having a potentially much greater choice of FTTP networks outside your home is generally a positive thing, even if the prospect of having several different bouts of disruptive civil engineering work going on in the same area – one after the other – probably isn’t.