More broadband bother as BT is accused of 'ripping off' taxpayers

BT's behaviour over rural broadband is under the spotlight again: the Public Accounts Committee reckons it's ripped off the government to the tune of £1.2bn.

by Emma Haslett
Last Updated: 17 Oct 2013
Rural broadband is one of those oddities mentioned in almost every budget, which no one really gives much thought to after the initial flurry of interest.

But someone’s been keeping an eye on it: the Commons Public Accounts Committee says the government has ‘mismanaged’ the roll-out of rural broadband because it gave all 26 contracts to BT – and the company is expected to win the remaining 18 contracts.

Providing expensive high-speed broadband to areas with low population density isn’t, as one might imagine, high on internet providers’ priority lists. So the government set aside £230m , which various local authorities matched, to persuade them to shell out, with another £250m available after 2015. The problem was that even with that incentive, only Fujitsu and BT bid for the contracts. In March, Fujitsu dropped out, saying the project had become ‘unattractive’.

But now it has the contracts, BT’s behaviour has been attracting the ire of spending watchdogs. In July, the National Audit Committee highlighted the fact that BT had said 40% of its costs would be on staffing, which the NAO called ‘hard to verify’. And it accused of overcharging for management costs to the tune of £3m.

Now the Public Accounts Committee has got involved too. This morning’s report said that ‘local authorities are contributing over £230m more to the programme than the department assumed in its 2011 business case and BT over £200m less, yet BT will ultimately benefit from £1.2bn of public funding’.

Margaret Hodge, the committee’s chair, added that the taxpayer has been ‘ripped off’. Strong words.

Hodge reckons the government should have ‘devised it differently, had bigger areas for the contracts so you could spread your costs more, allowed different technologies to be used and insisted on a 100% coverage’. To that end, ‘we would have found other people in the game and I bet we would have spent less of the taxpayer’s money’.

The accusations go on: BT didn’t tell local authorities exactly where it was going to roll out super-fast broadband, which meant rivals couldn’t draw up competing tariffs, and a clause in its contract prevented the local authorities it was dealing with from telling their peers what sort of costs they were looking at.

BT, though, says it’s all wrong.

‘[The report] is simply wrong and fails to take on broad a point-by-point correction we sent to the committee several weeks ago. We have been transparent from the start and willing to invest when others have not,’ it said.

The report suggests various changes, including forcing BT to publish its rollout plans and preventing the Department for Culture, Media and Sport (the government body overseeing the project) from spending money until it has ‘developed approaches to secure proper competition’.

Sadly, though, that will put the project, which is already delayed by two years, back even more. So it looks likely the rural communities in question will be left languishing on the digital shelf for even longer.

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