Abstracts: April 8th, 2015

This report describes progress in installing rural broadband and responds to criticisms relating to the cost of the project.

The report from Broadband Delivery UK, a unit within the Department for Culture, Media & Sport, predicts that the initial Phase 1 target of extending superfast broadband to 90% of premises in the UK by December 2016 will be achieved early in 2016. Phase 2 of the programme is on course to reach 95% of premises by 2017.

The Public Accounts Committee has criticised the cost of the programme and expressed concern that BT is the sole contractor.

The Broadband Delivery Unit has analysed cost data for phase 1 and found that BT’s reported capital costs are so far £142 million lower than in its original bids, including £34 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. This analysis 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.

To understand whether BT’s contracts were economically priced, the Delivery Unit 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.

The Public Accounts Committee expressed concern about the lack of competition in the programme, but the Delivery Unit conducted open market reviews and consultations to identify other o[tions. It did engage with the market and explore several options, but it did not fully develop or cost these options because doing so would have led to the same outcome but would have delayed rollout.

Take-up of superfast broadband so far has been significantly faster than forecast by BT in the phase 1 contracts. Take-up has risen to more than 20% already for 2 non-framework projects.

Both BT and the public sector will share the benefits of any extra profit resulting from higher take-up for the first 7 years after rollout through the contract’s clawback clause. After these 7 years, the supplier will keep all of the extra wholesale profit. Funds that are clawed back because of greater take-up can be reinvested. The Delivery Unit will need to help local bodies to reinvest funds while they are contracting and rolling out their phase 2 projects.