How BDUK bungled Britain's next-gen broadband rollout

18 Jul 2013

I’ve just witnessed one of the most brilliant performances I’ve ever seen. It wasn’t a footballer scoring the perfect hat-trick or an actor delivering a memorable theatrical showpiece – it was a man talking about broadband.

The maestro in question is Nicholas James, chief executive of UK Broadband, a company that wanted to spend £150 million on improving Britain’s fibre network, but couldn’t. Yesterday, he appeared before the Public Accounts Committee, and in only ten minutes destroyed the credibility of the government body – Broadband Delivery UK (BDUK) – that’s spending almost half a billion pounds of public money on next-generation access.

He appears right at the start of this video, but below is an edited explanation of the reasons why the BDUK bidding process has failed to deliver a competitive nationwide fibre network, and has instead left the country at the mercy of BT.

Flawed bidding process

As any regular PC Pro reader will know, only one company is left standing in the bidding for public money for fibre broadband, and that’s BT. It’s won every local council contract so far, and is the only company that can win any money in the future.

James, whose Hong Kong-based company wanted to invest up to £150 million in British fibre broadband, explained why smaller bidders never had a prayer. “It’s true to say we haven’t spent a penny, and that’s because there was no way we could join in the process because of the way it was structured,” he told MPs.

It’s the fault of the officials who allowed themselves to be lobbied

James explained that because companies had to submit bids for each individual council, and because contracts were awarded on an ad hoc basis rather than in one go, it was impossible for rival bidders to have any certainty over a potential investment. “The geographical areas are too small,” he said. “The risk being that if you only get one [area], you cannot amortise the start-up costs. You don’t know how many [contracts] you’re going to win.” Indeed, Fujitsu – which was planning to spend up to £1 billion on the BDUK process – made much the same argument after it was forced to withdraw.

Lowering the fibre threshold

James claimed the original plan was to deliver 100% NGA (next-generation access) connections – which means delivering download speeds in excess of 30Mbits/sec. However, he claimed that BDUK lowered the bar after lobbying from BT, which wanted potentially slower, fibre-to-the-cabinet (FTTC) connections to be included.

“The original plan was to provide 100% NGA,” he told the committee. “Any consortium [of bidders] setting out to deliver NGA to 100% [of the area] was disadvantaged against BT, which couldn’t deliver 100%, but could deliver less than that,” as it already had a copper telephone infrastructure in place.

“It [BDUK] allowed state aid to fund fibre-to-the-cabinet,” he added. “If what you have is a connection to the cabinet with fibre in it, you get to tick the box of NGA. In reality, you might not get NGA,” he argued, because households and businesses that are a long distance from their local cabinet might never achieve the qualifying speeds.

“[BDUK was] influenced by a number of people and slowly took the goalposts down,” James claimed. “We should be delivering 100% [NGA], and we’re only delivering 90%.”

When pressed by MPs on who had pressured BDUK to lower the targets, James replied: “It has to be BT.”

BT declined to comment specifically on the allegation that it had pressured BDUK to lower the targets, but said it was “investing billions of pounds to radically improve the UK's broadband network whilst ensuring all companies have access to it on an equal basis”.

A BDUK spokesman said: "BDUK has never had an objective to provide 100% coverage of superfast broadband. In May 2011 the then secretary of state set a target of “superfast broadband should be available to 90 per cent of people in each local authority area by 2015” – this was based on our modelling of what was a realistic level of coverage that could be achieved by leveraging the £530m of funding announced for broadband. BDUK procurements are technology neutral and structured to maximise speed and coverage with the available funding - all other things being equal, a supplier able to provide a 100% coverage solution, while still being affordable, would have won a procurement process."

Wrongly writing-off wireless

James argued that BDUK irrationally failed to allow wireless providers to bid for the broadband contracts, forcing at least two potential bidders out of the running.

“It does worry me when you’ve got a report that says wireless can’t deliver NGA,” James told the MPs. “That’s completely untrue. Fixed wireless can. The EU has accepted that.”

“There was no attempt by the UK government to get over the fixed-wireless barrier,” he added. “Two potential partners withdrew because they knew they would not be allowed to deploy fixed wireless.”

“BDUK was given the opportunity by the EU to apply to allow fixed wireless to be allowed in January this year, and only last week – when they knew I was coming to this session – did they write the letter,” he claimed.

A spokesman for BDUK said: "BDUK’s approach has always been technology neutral, and in principle, wants to support any technology capable of deploying superfast broadband. The European Commission’s 2009 guidelines presumed that Fixed Wireless Access (FWA) technologies could not deliver superfast capabilities and therefore could not be subsidised. Throughout 2012, BDUK worked hard to prove to the EC that FWA could deliver superfast capabilities, and FWA’s suitability was eventually confirmed in the Commission’s approval of the UK’s scheme in November 2012."

No idea where BT’s going

A long-standing criticism from BT’s potential rivals is that they have little idea of where BT plans to roll out its own fibre network, making it difficult to create a business case. If a company were to commit, say, £50m to lay fibre in an area, only for the BT vans to roll into town six months later, the chances of a return on that investment are greatly reduced. BT does provide some forward guidance on which exchanges it plans to upgrade, but we still don’t know all the areas that will be covered by its fibre rollout, or which parts of towns and cities won’t be connected.

James suggested that if BDUK had followed the European guidelines on fibre rollouts, BT would have been forced to reveal where it plans to invest. “The one area where I have a real beef with them [BT], is that it’s still not telling us what they’re going to build where,” he said. “So the so-called 10% [that won’t get fibre under BT’s plans] is still not clear. That’s why I haven’t spent any more money.

“If the consultation process set out in the EU rules had been properly followed then they [BT] would have to declare very clearly where they were going to build, at what speeds, and what they were going to deliver, which would have revealed the 10%.”

Who’s to blame?

James admitted that he didn’t blame BT for pressuring BDUK into lowering the NGA threshold or for keeping its rollout plans secret – it’s a business attempting to extract the maximum return for its shareholders, after all.

Instead, he said the blame laid squarely at the feet of BDUK. “It’s the fault of the officials who allowed themselves to be lobbied. It should have been a much more robust process that shouldn’t have given in to some of that pressure.”

Bravo, sir. Bravo.

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