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By | Kelly Fiveash 26th September 2013 07:03

MPs slam bumpkin fibre rollout, demand halt to further £250m cash spaff

And an end to BT's 'quasi-monopoly'

Whitehall has insisted that its delayed multimillion-pound rural broadband project represents good value for taxpayers - even as a brutal parliamentary report published today attacks the government for failing to rein in BT.

MPs on Parliament's Public Accounts Committee (PAC), chaired by Labour politico Margaret Hodge, submitted seven recommendations to the Department for Culture, Media and Sport urging it to put an end to BT's "quasi-monopoly position". The committee claimed that the telco giant uses its clout to "limit access to both the wholesale and retail market to the detriment of the consumer".

In July, BT's policy director Sean Williams was forced to repeatedly fend off criticism levelled at his company by MPs scrutinising the government's broadband delivery project (BDUK), which was given £530m from the public purse to install fibre internet connections to harder-to-reach parts of the country where private investment had been shunned for not being commercially viable.

But over the course of the last year, BT has been the only telco to scoop up any of the 44 local council contracts, which much match central government funding, to install broadband for countryside-dwellers.

That fact has led to many within the broadband biz in Blighty declaring that the whole process had been anti-competitive, with BT - if it does scoop up the remaining contracts - likely to benefit from a whopping £1.2bn in taxpayer money upon expected completion of the work in 2017.

BT, for a while, had appeared to be in a two-horse race for the cash with Japanese tech giant Fujitsu. However, Fujitsu quit trying to win the funds in March this year by claiming that the competition conditions around the BDUK process were flawed.

Today's PAC report picks apart seven areas of concern about the management of BDUK funding.

It says that the Ministry for Fun's "procurement approach for the rural broadband programme failed to deliver meaningful competition for the letting of local contracts". The committee urged Culture Secretary Maria Miller's department to halt its plans to spend a further £250m up to 2017 until it secures "proper competition and value for money for improving superfast broadband after 2015".

In the summer, Hodge questioned BT's financial commitment to the entire project, after it had pledged in 2012 to plough a "further £1bn" of its own money, as well as the government's BDUK funds, into providing broadband to the final third of the country.

But the National Audit Office (NAO) had said that BT had got its sums wrong and would in fact contribute just £356m (23 per cent of capital costs) for its heavily subsidised rollout of mainly fibre-to-the cabinet (FTTC) broadband technology.

Today's PAC report claimed that the Ministry of Fun (aka DCMS)'s assumptions in its 2011 business case about the respective capital contributions of the public and private sectors had been "wildly inaccurate."

It called on the DCMS to "improve its modelling work" and do a better job of negotiating contracts with big suppliers, taking into account the long-term value of the assets a company such as BT will end up sitting on.

A lack of transparency about contract deals BT has struck with councils had weakened local authorities' abilities to ink cost effective agreements with the telecoms giant, the PAC found.

"The department should insist on a higher standard of cost transparency before contracting," the committee said. "Where contracts are not yet signed for the current [BDUK] programme, the department should secure BT's agreement to improve cost transparency, for example, by omitting the non-disclosure agreement between local authorities."

The MPs added that Whitehall needed to be more supportive of councils that are calculating BT's costs and take-up rates during the project. They also, once again, demanded that Miller's department publish BT's roll-out plans so that rival suppliers can start bidding for the final 10 per cent of homes and businesses not yet earmarked for public or private broadband investment.

Finally, Hodge and her colleagues on the committee concluded that BT's rivals had "legitimate concerns" about competition.

It said: "As part of its current review of the broadband market, [communications watchdog] Ofcom should explicitly address the impacts on competition of BT's wholesale pricing structure and of the terms and conditions attached to accessing BT's infrastructure."

BT chides MPs for failing to 'correct error-ridden' report

BT said it was "disturbed" by the MPs' report, claimed it was "simply wrong" and that the committee had failed to "take on board a point-by-point correction" that the company recently submitted to the PAC. It added:

We have been transparent from the start and willing to invest when others have not. It is therefore mystifying that we are being criticised for accepting onerous terms in exchange for public subsidy - terms which drove others away.

The taxpayer is undoubtedly getting value for money. BT faces a payback period of around 15 years on its rural broadband investments in spite of the subsidies available.

The one-time national telco also claimed that the DCMS had kept public spending tightly under control.

It added that it was not preventing local authorities from publishing information about which areas it would not reach under BT's current rural fibre broadband plan.

"The information in question is owned by local councils and BT is not standing in the way of publication. Northamptonshire has already published and we understand more councils will be doing so," it said.

Miller's department also admonished the MPs' report and claimed that it had safeguarded taxpayers' money by - for example - including clawback clauses in its contracts.

It also pointed out nine suppliers had pre-qualified for the BDUK framework, three submitted final bids and two were appointed to compete for the funds.

The DCMS claimed that "competitive tension" had been maintained throughout the procurement process. It blamed BT's rivals for withdrawing their bids, saying that they had primarily done so not because of competition concerns, but for commercial reasons, or due to lack of technical or resource capacity.

We put in place a fair commercial process and encouraged different suppliers to bid. We are disappointed that the PAC fails to recognise that thousands of rural premises who have never had a decent broadband supply are now getting one, something that is vital for farmers, rural businesses and all those who live outside major cities.

It seems unlikely then, based on such a caustic response from central government and BT, that the DCMS will accept the committee's recommendations. ®

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