BT Quizzed Over Investment Shortfall

News Article - Thursday, 18 July 2013 11:10

By: Kerry Butters Category: Connectivity

MPs yesterday demanded some answers from BT over why the telecoms giant has reduced its investment into the UK’s subsidised broadband deployment.

The news comes amid claims that rival companies dropped out of the bidding for projects around the UK, following rules being "set and altered in ways that favoured BT” and TalkTalk boss Dido Harding added that subsidies and "slack regulations” are conspiring to help BT rebuild a monopoly.

"There was no way we could join in the process because of the way the process was funded,” added Nicholas James , chief executive of Broadband UK, which initially planned to invest £150m to roll out superfast broadband in rural areas.

Tech firm Fujitsu had also planned to take part in the tax-payer funded Broadband Delivery UK  (BDUK) initially, but later withdrew amid fears it couldn’t compete. The subsidy pot is worth £1.2bn and BT had pledged to add "a further £1bn” of its own cash in order to provide broadband to the third of the country, where private investment was not seen to be viable.

However, the National Audit Office (NAO) has claimed that, by the end of the programme, BT will have contributed just £356m, representing 23% of the capital costs. This means that BT won’t cover around 19% of British homes and businesses and the firm has also been accused of  maintaining an air of "secrecy around its upgrade maps” which is holding back projects that could fill the gap.

BT said that the discrepancy in the figures from the NAO and its pledge was due to the watchdog failing to account for operational costs such as labour.

Despite the heavy subsidies, BT will not cover around 10pc of homes and businesses and MPs heard how secrecy around its upgrade maps was holding back alternative projects to fill in the gaps.

"BT is investing billions of pounds to radically improve the UK's broadband network while ensuring all companies have access to it on an equal basis. We are therefore shocked and mystified by some of the ill-informed (sic) comments played back by members of the committee. Deploying fibre broadband is a complex long-term investment but that was ignored as MPs prioritised soundbites over analysis," the company said in a statement.

It’s thought that the rural broadband project is currently running about 2 years late, with just 9 out of 44 projects expected to reach their original rollout targets. However, the delay is partly due to the fact that it was held up for six months by gaining EU approval.

"The rural broadband project is moving forward late and without the benefit of strong competition to protect public value. For this we will have to rely on the Department’s active use of the controls it has negotiated and strong supervision by Ofcom,”Amyas Morse of the NAO said earlier this month .

A report said that the "Department has secured only limited transparency over the costs in BT’s bids. It does not have strong assurance that costs, take-up assumptions and the extent of contingency contained in BT’s bids are reasonable.”

Whilst the NAO say that the funding contributed has been much lower than originally expected, at the same time BT is likely to "have benefited from £1.2 billion of public money” by the end of the programme.

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