MPs slam BT’s dominance of rural broadband roll out

BT’s dominance of the government’s rural broadband rollout has been slammed in a scathing report by MPs.

The Public Accounts Committee (PAC) criticised the government for failing to “secure proper competition” for the scheme and awarding the majority of public funding and contracts to BT.

It also slammed the Department for Culture, Media and Sport for failing to calculate the scheme’s costs. The bungle means that BT will benefit from taxpayer-funded assets worth £1.2 billion once the programme is complete. The report claimed that BT was expected to commit only £356 million to the project by completion.

“The programme to extend superfast broadband to rural areas has been mismanaged by the Department for Culture, Media and Sport,” said Margaret Hodge MP, Chair of the Committee of Public Accounts. “The sole provider BT has been placed in a quasi-monopolistic position which it is exploiting by restricting access to cost and roll-out information. 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.”

BT has described the report as “simply wrong”.

Hidden costs and delays

The government put aside £530 million in taxpayer-funded subsidies to encourage providers to develop superfast broadband in hard-to-reach areas, with an extra £250 million of that pot to be available after 2015. It then awarded contracts one-by-one by local authority.

It initially appointed two bidders, BT and Fujitsu, but Fujitsu dropped out of the bidding process in March, leaving BT the sole bidder. BT has won all local authority contracts to date, and is expected to scoop up the few that remain.

MPs pointed out that the project is two years behind schedule, and called on the government to halt further spending after 2015 until it can improve its cost calculations, introduce more competition and persuade BT to open up about its costs.

According to the report, BT has been allowed to keep its costs under wraps, meaning there’s no way to check whether its prices are reasonable. It also claims BT includes a clause in its agreements with councils that stop them from sharing cost information with other local authorities.

“The lack of transparency over BT’s costs is a serious risk to value for money, particularly as BT is the Department’s single supplier,” said the report. “The Department’s reliance on self-certification by BT – that its prices are comparable with those in its commercial rollout of superfast broadband – does not represent an adequate control.”

Mystifying claims

BT has vigorously defended itself, and pointed out that the fibre rollout was an “expensive and complex” business, despite the subsidies.

“We have been transparent from the start and willing to invest when others have not,” a spokesperson said. “It is therefore mystifying that we are being criticised for accepting onerous terms in exchange for public subsidy – terms which drove others away.”

BT claimed it wasn’t stopping local councils from publishing information about its costs. It also disputed the report’s claim that it would only commit £356 million in funding to the programme, and said the figure was closer to £700 million.

“The taxpayer is undoubtedly getting value for money,” it said.