The Superfast debacle – how the government is making a mess over broadband

The Countryside Alliance is angry – and with good reason.  The Government’s programme to roll out “superfast” broadband is running late.  “The majority of people living in the countryside think the Government’s efforts to bring broadband to rural areas have been poor”, reported the Alliance in a statement on AUgust 6th, pointing out that only 1% of the budget allocated by the Government has so far been paid out.  They go on: “The project will be nearly two years late” and “it has only served to exacerbate BT’s dominance in the market.”

The current superfast broadband programme has gone badly wrong – in both rural and urban areas – essentially because Government Ministers have forgotten what their predecessors in 1984 taught the rest of us: that competition is the key to successful telecommunications policy.

I do of course have a record to defend.  I am not a neutral observer.  I was the Minister for broadband in the original broadband roll out from 2002 to 2004.  That was a very successful programme, with smart Government intervention.  I was the Minister again in 2007-8, when we started talking about superfast, and again in 2009-10, taking over from Stephen Carter.

I was in that job when the “Conservative Technology Manifesto” was published before the last election.  It sounded impressive.  But looking back on it again confirms the view I took at the time, that it was fundamentally vacuous.

For example, it said: “We will be the first country in Europe to extend superfast 100 Mbit/s broadband across most of the population.  This is up to 50 times faster than Labour’s planned broadband network.”  The Conservative politicians who wrote that knew how misleading it was.  We had a plan to achieve universal access to 2 Mbit/s broadband by 2012, but were already preparing for superfast.  I set up Broadband UK, the current delivery vehicle, for that purpose.

In 2010 the new Government scrapped our 2012 universal 2 Mbit/s target, on the grounds it was hopelessly old hat.  The result is that, in 2013, many areas still don’t have any broadband at all.  Quietly, the Government has now reinstated the Labour target, but for 2015 instead of 2012.  I suppose we should be grateful for the acknowledgment that we were right after all.  And the Government’s rural programme is about delivering 24 Mbit/s broadband, not 100 Mbit/s.  The “Conservative Technology Manifesto” is not being delivered at all.

The Tory document went on to say: “We will unleash private sector investment to build this superfast broadband network by opening up network infrastructure, easing planning rules and boosting competition.”  Now, that would have been a good idea.  But instead, far from being boosted, competition has been throttled.  And that has been the fundamental mistake.

The transfer of Broadband UK from the Department for Business to the Department for Culture, Media and Sport, after Vince Cable’s indiscretion about Rupert Murdoch, did serious damage.  A great deal of expertise was lost after the transfer, and the capacity needed to handle large scale, commercially complex projects seems to have been lost too.

The consequences of these mistakes are now becoming all too clear.  The urban superfast broadband programme failed to get state aids clearance at all.  That is because the Government was not willing to impose the tough competition conditions that Brussels wanted on BT and Virgin.  And the Commission was right.  The result is that we now have just a pathetic voucher programme in urban areas.

And on the rural superfast broadband programme, BT has simply run rings around Ministers.  I don’t blame BT.  Their job is to get the best deal for their shareholders.  But Ministers are supposed to stand up for the public interest.

Absurdly, there is only one supplier on the Government’s rural superfast broadband framework list – BT.  Ministers should never have got themselves into that position.  The programme is two years late.  Ministers can do nothing – they have nowhere else to go.  BT has them over a barrel.  How did it all go so wrong?

Ten years ago, I was responsible for a programme of aggregation of public sector broadband demand.  We did it at the regional level, working with the Regional Development Agencies.  And it worked.  But in 2010 the RDAs were abolished.  One of the consequences was that superfast broadband had to be managed at the level of counties.  That has proved hopeless.  Counties are just not big enough for anyone to challenge BT.  Ministers were warned, but went ahead anyway.

So we now have only one framework supplier.  Competition will be non-existent – as the National Audit Office puts it in its recent withering report on this sorry tale, “The Programme has produced limited competitive pressure.”  BT tells us they will be delivering good value, but we have no idea whether they really are or not.  There is no other provider we can benchmark their costs against.

And the NAO reports that BT has flatly refused to provide adequate data on its costs.  The report comments, on p.36: “the Department does not have strong assurance over the appropriateness of the levels of contingency” built in by BT; or on page 7: “The Department has secured limited transparency over forecast costs”; or “BT’s first bid provided limited further information on cost drivers but the data still did not clearly identify input variables and corresponding unit costs.”

The NAO also points out that “All of the assets and infrastructure created using the £1.2 billion public sector investment in the Programme are likely to be owned by BT”.  You would think that, for a £1.2 billion grant, Ministers would at least have required BT to hand over decent financial data.  But they didn’t.

Superfast broadband in the UK is now way behind what is happening elsewhere.  Try as it might, the next “Conservative Technology Manifesto” is not going to be able to persuade us that the Government has met its target, that the UK should have the best superfast broadband in Europe by 2015.

And there has been an extraordinary fiasco over the final 10%.  BT is supposed to be delivering superfast broadband to 90% of rural customers, leaving the final 10% to community groups and others.  But whenever a firm or community group puts its head above the parapet to propose an initiative in a very rural area, BT announces that the place in question is, in fact, within the 90% it is responsible for, and so it will be deploying a network there – with the aid of its enormous public subsidy – so wrecking the viability of the alternative proposal.  And BT has steadfastly refused to say where exactly its 90% is!

Some people claim BT wants to stop anyone else deploying superfast broadband, so that the true costs of doing it will never be established.  We could well end up with a huge digital divide – an adequate service in areas like market towns, where BT will have rolled out; and nothing at all in the most rural areas, because BT will have seen off all the alternatives.

The Public Accounts Committee interrogated BT and civil servants on the basis of the NAO report at a hearing last month.  They were given a hard time – and BT executives complained bitterly afterwards.  But the truth is that the PAC has succeeded – finally – in placing some pressure on BT, when Ministers have abjectly failed to do so for three years.  It appears that the Committee has forced BT to publish the extent of its 90%.  We must all hope, also, that they will finally be required to hand over their costs data.

This has been frankly a depressing episode.  Ministers have failed to stand up for the public interest.  They seem to have forgotten why competition is important.  And there is still a real danger that BT could be overpaid for delivering late a programme which will provide far less than the 100 Mbit/s that was promised.