Daily Telegraph 26th September 2013
'Mismanaged' rural broadband programme costs homes an extra £20 on council tax bills
Expanding broadband to homes in the countryside is costing households an extra £20 in council tax because of “mismanagement” of the scheme in Whitehall, MPs say today.
Margaret Hodge, chairman of the Public Accounts Committee
By Christopher Hope, and Chris Williams
6:00AM BST 26 Sep 2013
MPs on the Public Accounts Committee said the programme – originally intended to give super fast broadband to 90 per cent of homes by 2015 – had been run badly. They complained that the programme was structured to give British Telecom, Britain’s biggest telecommunications provider, a “quasi monopolistic position”. The MPs’ report is embarrassing for Lord Livingston of Parkhead, who quit as chief executive of BT earlier this year to take over as a Government trade minister.
It is also a blow for Culture secretary Maria Miller, who is in overall charge of the programme. The Government has already revised its initial target of 90 per cent of the UK having super-fast connections by 2015 to 95 per cent by 2017. The MPs’ investigation was triggered by a report in The Daily Telegraph last October which alleged that BT could be charging a mark up of up to 80 per cent to install rural broadband. BT strongly denied the claims. Competition was meant to bring down costs. But only two service providers - BT and Fujitsu – were named as bidders, with Fujitsu eventually dropping out. Mrs Hodge said that her committee had found that BT had won every one of the 26 local broadband contracts let until June 2013. She said the remaining 18 contracts – which are meant to be bid for by rival companies – were also likely to go to BT. Margaret Hodge, the chairman of the committee, said: “The department’s approach to procurement failed to deliver any meaningful competition to drive down prices and maximise coverage.” Officials had failed to check whether BT’s bids were “reasonably priced”. She said the scheme was now costing councils an additional £230million – the equivalent of nearly £20 per household in the countryside.
Mrs Hodge said: “The programme to extend super-fast broadband to rural areas has been mismanaged by the Department for Culture, Media and Sport.
“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 £1.2billion of public money.” She added: “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.” The committee said the department should not spend any more public money “until it has developed approaches to secure proper competition and value for money for improving super-fast broadband after 2015”. The MPs also called on regulator Ofcom to “address explicitly the impacts on competition of BT’s wholesale pricing structure and of the terms and conditions attached to accessing BT’s infrastructure”. A BT spokesman said it was “disturbed” by the report, adding that it believed it was “simply wrong and fails to take on board a point-by-point correction we sent to the committee several weeks ago”. He 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 Department for Culture has imposed a rigorous auditing process that ensures every penny is accounted for. Rolling out fibre is an expensive and complex business but we remain committed to the programme. “The network we build will be open to all our rivals, who will be able to sell services to consumers, paying us the same prices we charge our own retail division.” A department spokesman said: “We disagree with the views expressed by the PAC which are at odds with the findings of the National Audit Office report. They found our approach reduced the cost to the taxpayer and reduced risk. "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.”