Last week Oxera reported on UK state aid measure for
Broadband. The school report read ‘effective …in very trying circumstances’. The school report was paid for by BDUK the
party being judged. The key new piece of
information was that BT contributions would be subject to a three year wait and a
negotiated reconciliation process.
The Welsh Audit report is also at least 5 months late and
started in April 2014.
The chief criticism I would have is that the report does not
develop the work already available to it from the NAO activity in England and
Scotland but starts afresh. There may be good reason but useful new information emerges.
This report says ‘reasonable’ progress is being made. I do not know whether this is the equivalent
of identifying an ability to ride a bicycle as a leadership skill but
delivering improvements to 345,000 premises is real progress. Audit Wales could have added that this includes about 1,700 cabinets and in paying
£81,000,000 so far the subsidies based on
per premise passed are in excess
of £42,000 per cabinet. This number
crosses many thresholds and breaks many promises. BT at PAC (1) would not acknowledge any
number above £28k, even though the
£1.2bn contracted for phase 1 of 28,000 cabinets points to this number – fag packet serendipity. In 2012 if you dared make the calculation,
and someone leaked your work you would be
called outrageous and ridiculous and sacked, yet here it is – published if you know where
to look. Here we see the benefits of
switching to BDUK’s milestones to cash process,
you escape this nonsense of costs divorced from the underlying cost of
delivery. The NAO and BDUK deserve some credit, perhaps lots of credit, for getting
blood(actual costs) from BT’s stone. However the old process could exist for the first
8 contracts not in the milestones to cash process and this accounts for I think 1.5m premises of the 5.4m contracted. But there
will a reconciliation process so it might be ok, but not if your in the final 10-15%. You will need to wait while the nature of BT
capital is dicovered over and BT has exhausted its ability to generate an invoice.
This report saves
Oxera having to re-write their report of last week which said BT’s bid price
was £10,000 less per cabinet (c£32k) and the actual cost before BT contribution
was running at less than £25,000 for each of the first 12,500 cabinets before
BT’s contribution. The Welsh are paying
circa £42,000 per cabinet using the same state aid measure. So much for insuring BT is not payed more
than 100%. This is the reverse of gap
funding, the more populated the area the more subsidy you get paid, reducing the probability of the money
reaching those most in need. But there
is a reconciliation process and BT have promised £26m or £35 per premise
Once you accept Welsh audit have confirmed the Welsh Government are paying more than
100% of cost and this is somehow ‘reasonable’ and is the opposite to how ‘gap
funding’ was intended to work, the
information on BT’s capital is useful.
£26m or £35 per premise passed is
an intriguing number.
BT claim to have spent £2.5bn to provide coverage 19m
premises. This is £130 per premise. I think the £35 per premise is a more honest
number. My own humble calculations show
BT could not have spent more than £50 per premise on the commercial rollout
suggesting BT cost per cabinet would be £20k per cabinet and fibre path. The £35 per premise across an average of 400
premises takes this total to £14,000 which is entirely possible, but it suggests BT commercial investment drops below £1bn to
£700m, which is getting a bit
skinny, but it is still a useful
reference point as this deal featured the then CEO of Openreach who claimed on
the BBC in 2013 that each cabinet cost £100k each, so the £40k subsidy although double the
current cost is a comparative bargain in what would have been trying circumstances.
Finally, Audit Wales
highlight the contractual requirement for 40% FTTP. Certainly the budgets permit such an ambition
but Audit Wales confirms the contractual requirement but lacks the any means to
enforce it and suggests BT has no means or intent to deliver it. So much for best in Euope.
I do not have access to the coded language of Audit
Wales! If you see the word ‘reasonable’
what is the code? Do you get another
email telling you to add ‘T’, or, are you asked to find a scrabble word of 5
letters beginning with L and ending in R!
I would probably need to read the Welsh language version to determine
the code. The latter would be more fun
than having to write the report let alone act upon it.
My apologies to Audit Wales but many thanks for confirming the per premise passed
fee, the existence of which is something
BT has denied repeatedly and contradicts evidence relied upon and documented in Hansard.