COMMONS

Government failed to promote competition over rural broadband programme

01 April 2014

Public Accounts Committee publishes its 50th report examining the roll-out of the  rural broadband programme.

The Rt Hon Margaret Hodge MP, Chair of the Committee of Public Accounts, today said:

"The Government has failed to deliver meaningful competition in the procurement of its £1.2 billion rural broadband programme, leaving BT effectively in a monopoly position. The scheme is designed to help get broadband to areas, mainly rural, where commercial broadband infrastructure providers currently have no plans to invest.

Since our hearing in July last year, when 26 of the 44 contracts to deliver this were with BT, all remaining contracts have now also gone to BT. Despite our warnings last September, the Department for Culture, Media and Sport has allowed poor cost transparency and the lack of detailed broadband rollout plans to create conditions whereby alternative suppliers may be crowded out.

Whilst BT claims it is making further concessions, this is not impacting on rural communities. Local authorities are still contractually prevented from sharing information to see if they are securing best terms for the public money they spend. Communities can still not access the detailed data they need to understand whether they will be covered by BT’s scheme in their area. Other broadband providers might be squeezed out of the rural market by BT’s actions.

BT’s monopoly position should have been a red flag for the Department. But we see the lack of transparency on costs and BT’s insistence on non-disclosure agreements as symptomatic of BT’s exploiting its monopoly position to the detriment of the taxpayer, local authorities and those seeking to access high speed broadband in rural areas.

So, we are still receiving representations. For example, in the case of Cumbria, people wrote to us to say that BT was still not allowing the County Council to release sufficiently detailed rollout information. But the Department thought that the Cumbria County Council was able to publish the data it wanted to.

We want the Department to work urgently with all local authorities to publish detailed mapping of their implementation plans, down to full (7-digit) postcode level. The information should include speed of service, as soon as that is available.

The Department should collect, analyse and publish data on deployment costs in the current programme, to inform its consideration of bids from suppliers under the next round of funding. And before that next round of funding is released, the Department should work with local authorities to ensure there is real competition and value for money.

If we don’t hear that the Department is making significant progress on our recommendations we will require a further hearing to find out why it is not improving its approach to protecting public funds."

Margaret Hodge was speaking as the Committee published its 50th Report of this Session which, on the basis of evidence from the Department for Culture, Media and Sport and BT, examined the roll out of the rural broadband programme.

When the Government published its response to our September 2013 report on the rural broadband programme, we were disappointed to see that the Department for Culture, Media and Sport had failed to engage constructively with our conclusions and recommendations. We therefore recalled the Department and BT to give further evidence in January 2014 and our resulting conclusions are set out below. In its response we expect to hear the Department is making significant progress on the areas covered, or we will require a further hearing to assess why the Department is not improving its approach to protecting public funds.

There is still not enough consistently good information published by local bodies about planned rural broadband coverage and speed. Despite our recommendation last September, many of the maps currently available do not give sufficiently detailed information about BT’s coverage to be of use to other potential suppliers seeking to plug the gaps. After we challenged the Department further in January, it issued guidance clarifying that it expects local bodies to publish detailed coverage plans. If the Department’s guidance is followed this time, these should set out where and when superfast broadband will be rolled out, and do so at 7-digit postcode level. But it is still not good enough that, despite £1.2 billion of public money being spent, it is taking so long to get this information out there. Any lack of clear and easily accessible public information will only make it harder for other potential suppliers to prepare bids for the next round of funding.

Recommendation: The Department should work urgently with all local authorities to publish detailed mapping of their implementation plans, enabling searches down to full (7-digit) postcode level. The information should include speed of service, as soon as that is available.

The Department failed to act on our recommendation to secure a higher standard of cost transparency before the remaining contracts were signed. Improved cost transparency should have been an important safeguard to protect the taxpayers’ interest and ensure that individual contracts were competitively priced and that BT was not taking advantage of its position as monopoly supplier. But the Department rejected our recommendation, and all remaining contracts under the current programme have since been awarded to BT. The Department has at least now agreed to review the non-disclosure agreements, which prevent local authorities from discussing and comparing BT’s costs directly between themselves.  The Department also told us that it will soon have better information on actual costs of deployment.

Recommendation:  The Department should collect, analyse and publish costs data on deployment costs in the current programme, to inform its consideration of bids from suppliers under the next round of funding.
We reiterate our previous conclusion that the Department’s procurement approach failed to deliver meaningful competition.  Since our hearing in July last year, when 26 of the 44 contracts to be awarded by local bodies had gone to BT, all remaining contracts have now also gone to BT. In our view, the lack of competitive tension from other bidders put BT in a strong position and restricted the Department’s ability to insist on value for money safeguards such as unfettered cost transparency. We will be seeking assurance that the Department has taken full account of our concerns in delivering its next programme, in seeking to maximise competition, in promoting value for money and in ensuring that the supplier contributes fairly to the capital cost.

Recommendation: Before the next round of funding is released, the Department should work with local authorities to identify opportunities to promote competition and value for money; including considering alternative solutions, joint working and fair capital contributions from suppliers.

Further information

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