BT hands £129m back to UK.gov after beating rural broadband targets

Super generous state monopoly? Fat chance – it's in their contract

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Both BT and the Ministry of Fun – or the Department of Culture, Media and Sport, if you prefer – have spun BT’s toeing-the-line-of-a-contractual-obligation as unbridled generosity towards taxpayers.

A statement from the Minister of Fun, John Whittingdale, said:

It's fantastic to see that the rollout of superfast broadband is delivering for customers and for the taxpayer. The Government was clear from the start that as levels of people taking up superfast broadband went beyond our expectations in areas where we invested public money, BT would reimburse the taxpayer for reinvesting into further coverage across the UK. This now means that BT will be providing up to £129m cashback for some of the most hard to reach areas.

The funding was part of a Broadband Delivery UK (BDUK) project which has the aims of:

  • provide superfast broadband coverage to 90 per cent of the UK by 2016
  • provide basic broadband (2Mbps) for all by 2016
  • provide superfast broadband to 95 per cent of the UK by 2017
  • explore options to get near universal superfast broadband coverage across the UK by 2018
  • create 22 “SuperConnected Cities” across the UK by 2015
  • improve mobile coverage in remote areas by 2016

The funding will be made available to local authorities to reinvest in providing further broadband coverage to even more homes and businesses. This windfall will happen much earlier than originally planned, although one must question the government's ability to plan given that they clearly got it wrong the last time and that the refund only kicked in this time round because take-up so exceeded BT’s initial business case.

The high take-up rate to date has resulted in BT making a new business case assumption of reaching 30 per cent take-up in these areas.

Website ISPreview noted that the estimates have always been low-ball, saying: “At this point it’s worth noting that BDUK has always appeared to have a surprisingly low assumption of take-up. Oxera’s report in May 2015 found that, as of Q2 2014/15, overall take-up by premises passed as a result of the scheme was 8.2 per cent compared with BDUK’s expected take-up of 1.8 per cent.”

BT defended the projection, saying: “This 20 per cent take-up rate was based on international comparisons and BT’s experience in its own commercial roll-out.”

While £129m sounds like a lot, there are significant diminishing returns in reaching the more rural areas and while the cost of the raw technology comes down, the cost of digging trenches and installing the cable does not.

One approach might be radio, and Airwave, which provides communications to the emergency services, is in discussions with BDUK on providing some services through its radio network which has 4,000 microwave linked base stations giving what it claims is 99 per cent UK terrestrial landmass coverage. ®

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