There is a “quasi-monopoly” favoring BT (News - Alert) in the deployment of fast broadband in the United Kingdom under a new project, which was supposed to help consumers but actually hurts them, a according to a new government report.
The Parliament’s Public Accounts Committee says the roll-out of quicker broadband to rural regions is clearly favoring BT.
As of now, about two-thirds of the United Kingdom will have access to superfast broadband by spring of 2014. The other third of the nation needs government support to get access – which was the focus of the program.
In light of the current situation with BT, the committee is recommending that the Department for Culture, Media and Sport “should not spend any of the further £250 million [which is about $400,750,000] of public money until it has developed approaches to secure proper competition and value for money for improving superfast broadband after 2015.”
That means the planned £250 million expenditure, which was supposed to expand coverage of superfast broadband in the coming years – and which is likely heading to BT – should be delayed or stopped, to make sure BT has given bids which are fair.
In total, £1.2 billion ($19,236,000,000) has been awarded in contracts.
All 26 contracts for rural broadband were awarded to BT, and the report predicts BT “likely” will be given the 18 remaining contracts. In March, Fujitsu (News - Alert) said it would not bid for any more local contracts. It had been the only other company besides BT which was in the running for contracts.
The committee complained how the Department for Culture, Media and Sport “accepted contract terms that were overly generous to BT and do not promote value for money, such as confidentiality clauses over bid costs and roll-out plans,” the report said. There also needs to be more cost transparency.
“The Department also failed to negotiate the full access it needed to BT's cost information to validate that bids from BT for local projects were reasonably priced; a key control over value for money on a program where there is no competitive tension in individual procurements,” the report adds.
The rural broadband program lacked competition and BT was able to strengthen “its already strong position in the market,” the report adds.
In addition, the report charges BT is preventing local authorities from providing information on the areas it will and will not cover with superfast broadband. Other providers are “constrained in their ability to build systems which ensure universal coverage,” the report said.
BT will serve at least 90 percent of regions, but given some of the regions will not be served, the Department should publish BT's roll-out plans “so that other suppliers can get on with trying to reach the remaining 10 percent of the population that will still be without superfast broadband.”
Delays are also a concern. The program is now expected to be completed by March 2017, which is 22 months after the planned deadline, the report said.
Also, Ofcom, the UK regulator, is now reviewing the broadband market, so the committee said it should look at whether enough is being done to “promote competition.”
“As part of its current review of the broadband market, Ofcom should explicitly address the impacts on competition of BT's wholesale pricing structure and of the terms and conditions attached to accessing BT's infrastructure,” the report said.
In connection with these concerns MPs who represent the Labour Party have questioned why Ian Livingston, the head of BT when the contracts were signed, was made a peer and a trade minister, this year.
"These botched contracts were the responsibility of ministers,” Mary Creagh, the shadow environment minister, was quoted by The Guardian. “But the recruitment to government of the man who was in charge of BT when these contracts were signed was David Cameron's call." Cameron is the Prime Minister.
Meanwhile, BT said the report was incorrect.
"We have been transparent from the start and willing to invest when others have not," a BT spokeswoman was quoted by The Guardian. "It is therefore mystifying that we are being criticized for accepting onerous terms in exchange for public subsidy – terms which drove others away. The taxpayer is undoubtedly getting value for money," she said.
“We put in place a fair commercial process and encouraged different suppliers to bid. We are disappointed that the PAC fails to recognize that thousands of rural premises who have never had a decent broadband supply are now getting one," she added.
Edited by Alisen Downey