MPs slam raw deal on rural broadband

MPs have criticised the way the government is rolling out superfast broadband to rural communities and businesses.

The Public Accounts Committee said the programme to extend superfast broadband to rural areas had been mismanaged by the Department for Culture, media and Sport.

The committee's Rural Broadband Programme report was published on Thursday (26 September).

Committee chairman Margaret Hodge MP said: "The sole provider BT has been placed in a quasi-monopolistic position which it is exploiting by restricting access to cost and roll-out information.

"The consumer is failing to get the benefits of healthy competition and BT will end up owning assets created from £1.2 billion of public money.

"All of the 26 contracts let by June 2013 had gone to BT and the remaining 18 are likely to follow suit."

Overall, BT is supposed to provide at least 90% coverage in rural areas but it is preventing local authorities from publishing proper information on the areas the company will and will not cover.

Details of speed and coverage in each local project are also being kept confidential, preventing other suppliers from developing schemes aimed at reaching the remaining 10% of premises and stopping communities and others from identifying alternative ways of providing superfast broadband.

This together with the department admitting the programme will be delivered in 2017—two years later than planned means that consumers are getting a raw deal despite the generous public subsidy, said the committee.

The department's approach to procurement failed to deliver any meaningful competition to drive down prices and maximize coverage.

Without that competitive tension, it is crucial to have full access to the single supplier's cost information to check that BT's bids are reasonably priced – but the department failed to negotiate that access with the company.

Ms Hodge said: "We now have a situation where local authorities are contributing over £230m more to the programme than forecast in the department's business case, while BT is committing over £200m less.

"The lack of transparency over BT's costs is a serious risk to value for money. Local authorities are prevented under the contract from sharing cost information which weakens their negotiating position with BT."

The programme is designed to help get superfast broadband to areas, predominately rural, where commercial broadband infrastructure providers currently have no plans to invest.

Under the programme, the department provides grant funding to 44 bodies (local authorities or groups of authorities) to subsidise them to procure the superfast broadband services for their areas.

The department has developed a framework contract for local bodies to use and also offers support when negotiating with the supplier to provide the infrastructure required to fill in the gaps in commercial coverage.

It has allocated £490 million in grant funding to local authorities for the Programme until 2015 and is also seeking matched funding from local authorities and capital investment from the supplier, BT.

The department's procurement approach for the rural broadband programme failed to deliver meaningful competition for the letting of local contracts.

The department appointed only two bidders – BT and Fujitsu - to the framework contract.

By June 2013 all of the 26 contracts agreed by local bodies had gone to BT and, following Fujitsu's March 2013 announcement that it would not be bidding for any more local contracts, BT is likely to win the remaining 18.

The full report can be downloaded here.


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