Broadband badlands: BT’s ‘monopoly’ over rural web scheme

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Extending broadband to people in rural areas is something that the government says is a big priority.

But after long delays and rising public costs, the government’s superfast rural broadband programme, aimed at providing broadband for 90 per cent of the UK, has come under increasing criticism.

Now a report from the influential public accounts committee (PAC) has cast doubt on the whole programme. MPs have also warned the Department for Culture, Media and Sport (DCMS) not to pay the additional sum of £250m for post-2015 provision, as planned, until ministers can ensure value for money.

MPs’ main concern stems from having only one company – BT – contracted to provide the service. This has disadvantaged taxpayers and potentially, the quality of the service provided, MPs said.

@Channel4News Took about 12 seconds. Have BT Infinity 1 here, 32Mb. Itâ??s nowhere near as fast in real terms as when we got it.

— Max Tappenden (@maxtappenden13) September 26, 2013

@Channel4News too about 10 secs to fully load here in sunny Slough.

— Matthew E Streuli (@mattstreuli) September 26, 2013

The report also criticised BT for exploiting its “quasi-monopoly position” by enforcing confidentiality clauses on local authorities, so they couldn’t discuss costs, and by failing to provide information on where the remaining contracts are, which would allow more competition.

The result is that the taxpayer is contributing far more than it should be, said PAC chairwoman Margaret Hodge.

“The consumer is failing to get the benefits of healthy competition and BT will end up owning assets created from £1.2bn of public money… Overall, BT is supposed to provide at least 90 per cent coverage in rural areas but it is preventing local authorities from publishing proper information on the areas the company will and will not cover.”

The tender process drew criticism at the time, when just two service providers – BT and Fujitsu – were named as approved bidders, with Fujitsu eventually dropping out.

The government believed a financial incentive was needed to get a provider on board: the rural broadband programme relies on government and individual locals authorities for 70 per cent of its funding. Elsewhere in Europe, including Scandinavia and Ireland, rural internet access is just 25 to 30 per cent funded, the report found.

Video: Channel 4 News meets people in Cumbria who say bad broadband is affecting their businesses and prospects.

Capital contributions
Under the government’s current plans, local authorities are contributing £236m more to the programme than the department had assumed in its 2011 business case (730 million, rather than £494 million).

BT on the other hand has put in £207m less than originally planned, and will ultimately benefit from £1.2bn of public funding – from central government and from local authorities – the report found.

Rural access

The programme itself was announced in 2011, when the government said 90 per cent of each local authority in the UK should have access to an internet speed of over 24 megabytes per second (Mbps) by May 2015. At the very least, those remaining should have a minimum of 2 Mbps.

The process has suffered huge delays and is due to be completed in 2017, nearly two years later than planned.

And 10 per cent of the population will still be without broadband. In some parts of Cumbria, residents like Chris Harrison have taken matters into their own hands. He is a farmer at Coatlith Hill Farm, and told Channel 4 News that he increasingly used the internet to carry out his farming work (see video).

Without competition, it’s very hard for local authorities to judge whether they’re getting value for money – Malcolm Corbett, INCA

But he is forced to rely on a local co-operative broadband network for internet access – a group partly funded by the government to help people like him in rural areas who feel they are being left behind by the government.

The department has allocated a further £250m to increase superfast broadband from 2015 to 2019, but the report found that it does not yet have a plan for reaching 100 per cent coverage, and recommended that the department does not spend any money “until it has developed approaches to secure proper competition and value for money for improving superfast broadband after 2015”.

Forty out of 44 areas have already signed contracts with BT: the Isle of White, Berkshire, Greater Manchester and Northern Ireland have yet to sign.

How does your broadband compare? See Ofcom’s fixed broadband map of the UK

Questions over BT transparency

Malcolm Corbett, Independent Networks Co-operative Association (INCA), has been raising concerns about the programme for the last two years. He has accused BT of “bullying tactics” when negotiating rural broadband contracts with local authorities, and he told Channel 4 News that there are “really significant problems within the programme that will reduce competition.”

“Without competition, it’s very hard for local authorities to judge whether they’re getting value for money. That’s coupled with some real questions over BT’s cost transparency.”

INCA has put forward four recommendations, including open access. That would allow alternative providers to access to BT’s publicly funded infrastructure so they can compete in the market and offer potentially more far-reaching services to those who won’t be served by BT.

‘Value for money’

The DCMS said the department had reduced costs to the taxpayer. “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,” said a spokeswoman.

A BT spokeswoman said: “We are disturbed by today’s report, which we believe is simply wrong and fails to take on board a point-by-point correction we sent to the committee several weeks ago.

“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.”