{"id":8559,"date":"2015-01-28T09:27:35","date_gmt":"2015-01-28T09:27:35","guid":{"rendered":"http:\/\/www.ispreview.co.uk\/?p=8559"},"modified":"2015-01-28T09:38:22","modified_gmt":"2015-01-28T09:38:22","slug":"bduk-superfast-broadband-rollout-ahead-schedule-made-savings","status":"publish","type":"post","link":"https:\/\/www.ispreview.co.uk\/index.php\/2015\/01\/bduk-superfast-broadband-rollout-ahead-schedule-made-savings.html","title":{"rendered":"BDUK Superfast Broadband Rollout is Ahead of Schedule and Made Savings"},"content":{"rendered":"

The National Audit Office<\/a> has, in anticipation of today’s Public Accounts Committee<\/span><\/a> event, published a useful report into its views on how effective the joint BT<\/a> and Broadband Delivery UK<\/a> scheme has been in terms of its costs, coverage and competition. The report finds that BT<\/a>’s Phase 1 deployment is running “ahead of schedule<\/em>” and BDUK predicts total savings of approximately \u00a372m by 2017-18, which could be reinvested.<\/p>\n

<\/p>\n

At present the Government is investing over \u00a31 billion to improve the United Kingdom’s broadband and mobile infrastructure, which is largely being matched by local authorities (current total of around \u00a31.7bn). Meanwhile further funding is also coming from Europe and via commercial investment through BT. At the time of writing the related Broadband Delivery UK<\/a> programme has the following key targets.<\/p>\n

BDUK Aspirations \/ Targets<\/strong><\/span><\/p>\n

\u2022 [Phase 1] Provide superfast broadband (24Mbps+) coverage to 90% of the UK by 2016
\n\u2022 [Phase 1] Provide basic broadband (2Mbps) for all by 2016
\n\u2022 [Phase 2] Provide superfast broadband to 95% of the UK by 2017
\n\u2022 [Phase 3] Explore options to get near universal superfast broadband coverage across the UK by 2018 [Final 5%]
\n\u2022 Create 22 \u2018SuperConnected Cities\u2019 across the UK by 2015
\n\u2022 Improve mobile coverage in remote areas by 2016<\/p>\n

NOTE:<\/span> BDUK funding for phase 1 was \u00a3530m and phase 2 is \u00a3250m (phase 3 has yet to be announced, beyond a small batch of \u00a310m pilots)<\/em><\/p><\/blockquote>\n

The NAO’s new analysis<\/a> (PDF) focuses primarily on the “rural broadband programme<\/em>” (note: they call it “rural<\/em>“, but this includes a lot of busy sub-urban style areas, such as large towns etc.) and it should be noted that over the past few years the targets for Phase 1 have shifted. Initially there was talk of the 90% goal being achieved by March 2015, then it got pushed to late 2015, then “early 2016<\/em>” and now it’s at “by 2016<\/em>” (i.e. December 2016 at the latest).<\/p>\n

The good news is that the Phase 1 rollout is said to be “slightly ahead of schedule<\/em>” – remember, this is the revised “by 2016<\/em>” target and so it’s technically still behind the original target – and is currently expected to reach the targeted 90% of premises in April\u2013June 2016<\/strong>. The actual figure anticipated for phase 1 completion is 90.7%, with an extra 4.2 million premises<\/strong> covered (approximately); currently we predict the programme has completed around half this.<\/p>\n

The NAO also reports that take-up of superfast broadband<\/strong> through areas upgraded via the BT and BDUK programme (Phase 1) has also been “higher than predicted<\/em>” and the following chart offers a practical example (albeit with local authority names excluded). This can be contrasted against the data for Local Authorities that we first published last month (here<\/a>). On the other hand somebody has clearly set some incredibly low targets for take-up (did they really think it would only reach 1-2% by September2014!).<\/p>\n

\"bduk_vs_bt_superfast_broadband_takeup\"<\/div>\n

Take note that the above chart does not show take-up for those projects which are not using BDUK\u2019s “milestone-to-cash<\/em>” process. Both Rutland<\/strong> and North Yorkshire<\/strong> have take-up rates exceeding 20%, but are not included in this graph. We assume BT’s separate project with the EU in Cornwall<\/strong> is also missing.<\/p>\n

Naturally strong take-up, particularly if it takes place within the first 7 years of the contract<\/strong> and goes above the all-important 20% level, could through the related claw-back<\/strong> clause help to return some of the public investment back for reinvestment in further upgrades and coverage. But after these 7 years BT will be able to keep all of the extra wholesale profit.<\/p>\n

Furthermore the NAO said that BDUK was predicting that its programme could deliver total savings of approximately \u00a372 million <\/strong>by 2017-18, which are said to have arisen partly due to “economies of scale and synergies from running all 44 contracts, and due to the standardised approach to \u2018milestone-to-cash\u2019 reporting<\/em>“.<\/p>\n

At the same time BT’s data to September 2014 states that the operator has “spent 38% less in capital costs than its financial model had assumed it would and it had covered slightly more premises than predicted<\/em>“. However it’s crucial to note that so far much of the BDUK deployment has focused upon the easier \/ cheaper areas and thus this balance is likely to look less dramatic towards the end of Phase 1 and into Phase 2, when costs will rise as the more complex rural areas need to be tackled.<\/p>\n

\"bduk_vs_bt_modelled_uk_capital_costs_broadband\"<\/div>\n

It’s for all of these reasons and more that the NAO notes how the lower costs and savings don’t necessarily “assure BDUK that BT priced the contracts economically<\/em>” and further tests are thus due to be conducted.<\/p>\n

NAO Report Extract<\/strong><\/p>\n

BDUK\u2019s analysis of cost data for phase 1 showed that BT\u2019s reported capital costs are so far \u00a3142 million lower than in its original bids, including \u00a334 million in project management costs. However, BT has provided some of the cheaper and easier street cabinets so far, so costs are likely to increase as it starts to build the more complex solutions. BDUK\u2019s experience of actual costs in phase 1 has led to BT agreeing to submit lower costs in its financial model for phase 2, which will reduce the amount of public funding required.<\/em><\/p>\n

To understand whether BT\u2019s contracts were economically priced, BDUK commissioned Atkins to do a small-scale trial cost comparison exercise. In January 2015 this exercise reported that, for specific infrastructure in one location, BT had charged the public sector approximately 20% less than the estimated cost for an alternative supplier.<\/em><\/p><\/blockquote>\n

On the issue of confidentiality<\/strong>, it’s noted that the PAC wanted the phase 2 contracts to be more transparent and yet today’s NAO report unsurprisingly finds that “BDUK has not omitted confidentiality clauses from phase 2 contracts as the Committee had hoped<\/em>“, although apparently BDUK considers that it still gets “enough assurance from its actual cost comparisons of local authority data<\/em>.”<\/p>\n

The NAO also warned that BDUK did not go far enough to improve competition for BT in the phase 2 contracts. “It did engage with the market and explore several options, but it did not fully develop or cost these options,<\/em>” said the NAO. Apparently BDUK reasons that it could have done this, but doing so would have delayed the phase 2 roll-outs.<\/p>\n

Predictably phase 2 will thus have “limited competition, as BT is now the only participant on the framework<\/em>” (i.e. virtually ZERO competition might be a better phrase). However it’s noted that 10 local bodies are separately considering keeping a minority of their funding back, which they may use for other procurements outside of the framework.<\/p>\n

“Overall, the effect of the first 2 phases will be to reinforce BT\u2019s already strong position in the wholesale market for broadband infrastructure (the Wholesale Local Access Market) … although BT must maintain these assets at its own expense<\/em>,” said the NAO.<\/p>\n

Finally the NAO called upon BDUK to ensure that Phase 3, which will tackle the final 5% of the UK, sticks to the potential outlined by its current pilot projects and gives more support to smaller ISPs \/ altnets. Later this afternoon the PAC will be able to dig into this report and question those involved more deeply.<\/p>\n","protected":false},"excerpt":{"rendered":"

The National Audit Office has, in anticipation of today’s Public Accounts Committee event, published a useful report into its views on how effective the joint BT and Broadband Delivery UK scheme has been in terms of its costs, coverage and competition. The report finds that BT’s Phase 1 deployment is running “ahead of schedule” and […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"ngg_post_thumbnail":0,"footnotes":""},"categories":[1],"tags":[474,471,55,56,69,38],"class_list":["post-8559","post","type-post","status-publish","format-standard","hentry","category-uk_isp_news","tag-bt","tag-bduk","tag-fttc","tag-fttp","tag-bt-openreach","tag-politics"],"share_on_mastodon":{"url":"","error":""},"yoast_head":"\nBDUK Superfast Broadband Rollout is Ahead of Schedule and Made Savings - ISPreview UK<\/title>\n<meta name=\"description\" content=\"The National Audit Office has, in anticipation of today's Public Accounts Committee event, published a useful report into its views on how effective the\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.ispreview.co.uk\/index.php\/2015\/01\/bduk-superfast-broadband-rollout-ahead-schedule-made-savings.html\" \/>\n<meta property=\"og:locale\" content=\"en_GB\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"BDUK Superfast Broadband Rollout is Ahead of Schedule and Made Savings - 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