Analysis: Is the government's fast broadband delivery strategy starting to fall apart?

By Derek du Preez
02 Feb 2012 View Comments
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In the coalition government’s October 2010 Comprehensive Spending Review, Chancellor George Osborne paid a great deal of attention to the rollout of superfast broadband in the UK. He announced the allocation of £530m of public money to complement private investment in next generation networks.

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Osborne declared that by 2015 the UK would have “the best superfast broadband network in Europe”, with hard-to-reach rural areas receiving special attention from government and network operators, in the hope that 90 per cent of people in each local authority will have next generation access. 

Four pilot areas – Highlands & Islands, North Yorkshire, Cumbria and Herefordshire – were selected to be “models for public and private sector collaboration on high-speed broadband networks in rural Britain”. The main aim of the pilots is to help the government and ISPs understand the commercial challenges associated with rolling out broadband infrastructure in rural areas, and each scheme was allocated up to £17m from the £530m pot.

This money is being distributed by Broadband Delivery UK (BDUK), a government body set up to establish a framework agreement, whereby suppliers will only have to bid once to be selected for anywhere between 30 and 50 potential broadband rollout projects. It is hoped that this will lower procurement costs for local authorities and suppliers.

It has now been more than a year since the government put its rollout plans in place and it is becoming clear that significant hurdles remain in ensuring universal broadband in the UK.

Last December, a freedom of information request submitted by rural Britain campaigners the Countryside Alliance (CA) revealed that very little progress has been made establishing next-generation broadband networks in the four pilot areas, with much of the money still unspent. The information showed that to date Highlands & Islands had not spent any of the money at all, Cumbria had spent just £20,000, Herefordshire £50,000 and North Yorkshire £500,000.

Culture Secretary Jeremy Hunt responded to this criticism in the new year by warning that local authorities could lose their BDUK funding if they do not sign broadband contracts by the end of 2012.

Head of policy for CA, Sarah Lee, believes the findings indicate that the local authorities do not have the necessary expertise to deliver such a large technology rollout.

“We are very disappointed that it is taking so long to improve rural broadband. We have got local authorities sitting on massive amounts of money but they just don’t know what to do with it,” says Lee.

“Local government does not have the in-house skills or knowledge on how to deliver broadband, and asking them to provide the technology without any guidance is a huge task,” she adds.

Lee argues that the government should be asking the authorities what is holding up the pilots, and suggests that experts and businesses need to work with the public sector more to support the process.

North Yorkshire – the authority that has so far spent the largest amount of the money available to it – says that it has been able to make more progress than the other councils because it is delivering broadband through a public/ private enterprise that employs telecom experts.

NYnet was set up in 2007 to serve the council, police, fire stations and schools, and also rent spare capacity to community broadband providers who then sell it on to businesses and residents. The venture has an annual turnover of about £8m.

“County council IT people can’t necessarily buy telecom networks because they don’t always have the right skills,” explains John Moore, corporate director of finance and central services at North Yorkshire County Council. 

Moore argues that by creating NYnet, the council can now use an organisation with the correct skills to deploy broadband in the area.

“NYnet is different – it is telecom people working on behalf of the county council, and because of that, we have got higher credibility with the telcos,” he says.

The issue of skills, or rather the lack of them, is not the only think holding back the pilots, however. For some ISPs, the commercial case for getting involved in supplying fast broadband to sparsely populated areas just does not stack up, given the lengthy and expensive procurement processes involved.

Cable & Wireless, for example, has engaged heavily with BDUK but has decided not to participate as a contractor in the framework. Brian Woodford, Cable & Wireless’ managing director of public sector and partners, believes not enough funding is being made available for the ISPs to make a return on investing in rural broadband. He fears that once the networks are complete, customers will not be willing to pay the high prices for next-generation broadband that ISPs would need to charge to fund further rollouts. 

“I think of it as a see-saw, where on the one side you have all the capital requirements needed to make universal rollout of broadband work, and on the other side you have all the sources of funding – EU, government, local authority etc,” says Woodford.

He argues that in order to make the see-saw balance, and consequently make rural broadband a feasible commercial option, a “delta has to be filled” – the delta being the amount that people are willing to pay for superfast broadband services, which is effectively the return on investment for ISPs.

“Are people going to pay £50 a month for these services? Probably not. That’s what makes this model a problem, the funding is insufficient. That’s the discussion that should have happened to make this policy work,” says Woodford.

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