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Turnbull's UK NBN template turns sour

A delay of two years, coupled with a £207m cost blowout, has left the UK's rural broadband programme in an unenviable position.
Written by Chris Duckett, Contributor

For many years, Australia's Shadow Communications spokesperson, Malcolm Turnbull, has called upon the local media to pick up the phone and hear what BT is up to with the UK's fibre-to-the-node (FttN) rollout. After this weekend's revelations, perhaps Mr Turnbull will be reconsidering his journalistic guidance.

Broadband in the UK is divided into two initiatives: An open-access, wholly privately funded network rolled out by Openreach, the wholesale infrastructure arm of British telco giant BT, which will deliver broadband to two thirds of the UK and service 19 million premises; and the publicly subsidised rural broadband programme that covers the remaining third of the population, and aims at 90 percent coverage.

A report on the rural broadband programme by the National Audit Office was released over the weekend, and the report did not make for happy reading. The UK's taxpayer-subsidised rural broadband rollout has been delayed by two years, and the public purse will suffer a cost blowout of £207 million on top of £1.2 billion of subsidies set aside for the rollout.

The UK Department for Culture, Media and Sport, which oversees the rollout, estimated in its 2011 business case that the private sector would need to pay 36 percent of the program's total projected funding of £1,547 million to reach 90 percent coverage of the population.

"Following the negotiation of contract conditions, the department now expects suppliers to provide only 23 percent of overall funding, £207 million less than it modelled in its 2011 business case," said the report.

"Contributions have varied between 38 per cent and 15 per cent of funding for each local area. Local bodies have provided greater contributions than expected, with total coverage slightly increasing to an estimated 92 percent."

Four areas will not obtain the stipulated 90 percent coverage target, with the report saying that "funding allocations may require some revision if the ministerial target is to be met".

"Any inaccuracies in the funding allocations may reflect the difficulty faced by the department in identifying the scale of intervention required in 2011 before commercial plans were known, and in forecasting the cost of delivery."

The original deadline of May 2015 will have only a 20 percent rate of completion, with nine of the 44 projects that make up the rural rollout expected to be completed by that date. The cause of such delay? A six-month delay in the process to receive EU funding.

To add to the morasses, reports surfaced last year that accused BT of inflating costs and passing them onto local councils.

"The Department [for Culture, Media and Sport] identified BT as overcharging for project management costs by £3 million in one area, and made BT remove the identified costs from that bid," said the report. "Some local bodies reported that they valued the department's support in checking bids."

Due to confidentially clauses, councils are not allowed to disclose or compare deals made with BT in order to see whether they are being taken for a ride.

BT is competing alone for the rollout contacts, after its only competitor, Fujitsu, was allegedly placed on a supplier blacklist, and did not place bids for a number of projects.

It's quite a warning to Australia's National Broadband Network (NBN) for what could happen should the nation follow the British blueprint.

The speed that the UK is aiming for is 24Mbps, which is slightly below Turnbull's stated target of 25Mbps by the end of the first term of a Coalition government.

Although the UK had a six-month wait in obtaining EU funding for its project, Turnbull would have to renegotiate any existing arrangements with Telstra. Telstra is known to play hardball, and it's a toss-up over which entity would be harder to deal with: The EU bureaucracy or the Thodey-led telecommunications juggernaut.

Throw in some asbestos pit remediation delays, and the sheer size of the challenge to complete an FttN rollout across Australia in a three-year window begins to crystallise. If Turnbull's exemplar for broadband success in the UK cannot achieve reasonable results, why should the Australian public expect that we could do any better mimicking the project?

The UK experience shows that any claims that Turnbull makes about FttN rollouts being less susceptible to cost blowouts and schedule extension should be viewed with a healthy dose of cynicism.

There is no magic bullet to fix the budget and schedule problems that inevitably occur on large infrastructure projects.

In fact, Australia may head closer to the UK experience than initial inspection may reveal. ZDNet understands that approaches have been made by a large Australian telco to gauge the interest in having the company take over construction of the NBN should a Coalition government take office.

Should that happen, the government would be wise to heed the advice of the UK National Audit Office, which pointed out the issues with trying to obtain value for money in an economy with a sole supplier.

"BT did not provide the department with the detailed model, citing commercial confidentiality and a high degree of complexity. This makes it difficult for the department and local bodies to gain transparency over the level of costs included in BT's local bids.

"Several local bodies we consulted told us that they do not understand the costs included in bids or whether variations from the reference cost book were justified, although others valued the reassurance the department offered through its bid comparisons."

Such is the situation in the UK, that a village in Oxfordshire got together and engaged a private company in order to enjoy the same broadband as the rest of the UK.

Let's hope that Australian rural towns will not have to resort to the same tactics to enjoy the communications of the 21st century.

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