Sep 26 2013
The rural superfast broadband programme has been mismanaged by the Government and placed sole provider BT in a "quasi monopolistic position", the chairwoman of the Commons spending watchdog has said.
Concerns were raised after the Government revised its initial target of 90% of the UK having superfast connections by 2015 to 95% by 2017.
The tender process also drew criticism when just two service providers - BT and Fujitsu - were named as approved bidders, with Fujitsu eventually dropping out.
The Public Accounts Committee (PAC) said the Department for Culture, Media and Sport (DCMS) mismanaged the project, and BT was exploiting its monopoly by restricting access to cost and roll-out information.
PAC chairwoman Margaret Hodge said: "The consumer is failing to get the benefits of healthy competition and BT will end up owning assets created from £1.2 billion of public money.
"All of the 26 contracts let by June 2013 had gone to BT and the remaining 18 are likely to follow suit.
"Overall, BT is supposed to provide at least 90% coverage in rural areas but it is preventing local authorities from publishing proper information on the areas the company will and will not cover.
"Details of speed and coverage in each local project are also being kept confidential, preventing other suppliers from developing schemes aimed at reaching the remaining 10% of premises and stopping communities and others from identifying alternative ways of providing superfast broadband."
This, combined with the DCMS admitting that the programme would be delivered two years later than planned, meant that consumers were "getting a raw deal despite the generous public subsidy".
Mrs Hodge said: "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.
"We now have a situation where local authorities are contributing over £230 million more to the programme than forecast in the department's business case, while BT is committing over £200 million less.
"The lack of transparency over BT's costs is a serious risk to value for money. Local authorities are prevented under the contract from sharing cost information which weakens their negotiating position with BT."
A raft of recommendations include the DCMS not spending any more of the £250 million of public money "until it has developed approaches to secure proper competition and value for money for improving superfast broadband after 2015".
The PAC also called on regulator Ofcom to "explicitly address the impacts on competition of BT's wholesale pricing structure and of the terms and conditions attached to accessing BT's infrastructure".
Taxpayers' Alliance digital policy analyst Dominique Lazanski welcomed the PAC's report.
He said: "The PAC is absolutely right that no more taxpayers' money should be spent on this scheme until the DCMS has delivered meaningful competition for the contracts and ensured that value for money is being achieved.
"There needs to be far more transparency about BT's costs, take-up rates and roll-out plans to ensure that taxpayers are not being fleeced and so that other broadband suppliers can get on with filling the black spots not being covered by BT.
"Taxpayers should be deeply concerned that the broadband programme in its current form has seen hundreds of millions of pounds of their money wasted as a result of a centralised, one-size-fits-all scheme for fixed-line only internet connections."
A DCMS spokesman said: "We disagree with the views expressed by the PAC which are at odds with the findings of the National Audit Office. 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."
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.
"BT faces a payback period of around 15 years on its rural broadband investments in spite of the subsidies available. The DCMS 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."