Will the new state aid measure deliver the transparency needed on UK’s Rural Broadband contracts?
On the eve of what ought to be the renewal of the state aid
measure (SA33671) by the EU Competition Commission it worth highlighting once
more why we need more transparency. The
last three blogs have provided a number of justifications for such a move. This simple piece of evidence reinforces the
need for the state aid measure to be strengthened and enforced.
In this online document www.elexon.co.uk/.../2012/11/SVG147_06A_Charge_Code_Applicatio… · PDF SVG147_06A_Charge_Code_Application we can read of BT’s application for unmetered
power for the BDUK programme.
The document describes the commercial programme as of the
April 2013 of some 15m premises passed served by some 30,000 VDSL cabinets, and
suggests the final year of commercial will amount to another 4m premises passed
and a total of 50,000 cabinets. The
final year to April 2014 of 4m premises passed using 20,000 cabinets suggest
BT’s business models could support 200 premises passed without public funding.
It can be shown from BT presentations to City analysts that
the maximum they spent in any one year on the commercial rollout of NGA was
between £300-£400m. That provides a
range of between £15,000 and £20,000 a cabinet and fibre path or £75-£100
invested per premise passed.
We learn from the second National Audit Office report in
January that BDUK were total average costs of less than £25,000. We can piece together that to April 2015, the
2.5m premises passed were served by 12,500 cabinets, which is roughly an
average of 200 customers passed per cabinet installed. BT reported some £126m in state aid receipts
in 2013/14 and some £390m for 2014/15.
This leaves little room for any direct capital contribution from BT, although
counties like Surrey who are a pre-BDUK contract have confirmed a BT capital contribution
without revealing how much.
While these first 12,500 of the total 30,000 street cabinets
may be a little more expensive than BT’s commercial rollout, it does suggest if
the gap funding process for state aid was functioning, then very little public money would be needed
for this first tranche of activity,
leaving most of the public money available for the harder to reach
areas, where BT would naturally have least
appetite to invest in.
Rather than entering new contracts with new money, the
existing contracts could be extended if the state measure was enforced sufficiently
to secure BT’s capital contribution. The BT capital, to be of use has to be
available to build the network at the time of build, not just as a clawback
option to be haggled over later in the process.
Ideally the BT capital would be made available to Counties and devolved
administrations in the form of reduced payments so they can plan further and go
further within the existing contracts.
This would appear to be available to Surrey a pre-BDUK contract. It would suggest it should be available to
Increased transparency does not just force the issue with
respect to BT’s capital contribution for the rural projects, but will inform
policy makers and regulators as to just how cheap the network upgrade is
compared to original estimates. A total of £3bn rather than £5bn for FTTC with
some FTTP included. The £3bn includes the state aid contribution £1.7bn. While BT has resource challenges, the
underlying rationale for pursuing fibre access upgrades to complete conclusion
is more compelling than ever. There are
fewer if no excuses not to complete gaps in service in cities and urban areas.
Let’s hope those charged with reviewing the state aid
measure have the wit and cunning to secure a good outcome on our behalf. There is no particular reason why
officials, be they Whitehall, Local
Authority, or Brussels employees should tolerate being bluffed, blagged or
bullied on any detail the project needs to be the full success it can be and
needs to be.