Government plans to roll out superfast broadband to rural areas are nearly two years behind plan and may end up costing the taxpayer £207m more than originally thought.
That is according to the National Audit Office (NAO), which has slammed the Department for Culture, Media and Sport (DCMS) for the delays, lack of competition and failure to secure price transparency from BT in its Rural Broadband Programme.
Currently, about two thirds of the UK has access to superfast broadband.
The programme, which is backed by £1.2bn in public subsidies, was launched to ensure it is commercially viable for suppliers to roll out superfast broadband to rural, less densely popurated areas in the "final third" of the country.
But government plans to have the best superfast broadband network in Europe are 22 months behind plan, according to the NAO. Only nine out of 44 local projects are expected to reach their original target of providing 90 per cent superfast coverage of above 24 Mbps by May 2015, it said.
Competition between suppliers has also been limited, the NAO noted, with BT having so far hoovered up all 26 of the local contracts on offer.
Nine companies pre-qualified to submit tenders for the national framework but only three actually went on to put forward tenders and just two – BT and Fujitsu – were accepted onto the framework. In March, Fujitsu announced it did not intend to submit any further bids, leaving BT with a monopoly over the process.
"The design of the competitive framework had the advantages of ensuring affordability and transferring risk but, together with state aid conditions and other commercial factors, led to potential suppliers withdrawing from the bidding process," the NAO said.
"BT was left as the only active participant in the framework and is likely to win all 44 local projects."
The NAO also criticised DCMS for securing only limited transparency over the costs in BT's bids.
The project funding contributed by the telco giant has so far been lower than originally modelled, it added. Despite being likely to have benefitted from £1.2bn in public money by the end of the programme, BT is now expected to provide just 23 per cent of the overall projected funding of £1.5bn, £207m less than was modelled in 2011, the NAO said.
"The rural broadband project is moving forward late and without the benefit of strong competition to protect public value," said NAO head Amyas Morse.
Margaret Hodge MP, who chairs the Public Accounts Committee, said Ofcom needs to "up its game" and ensure BT does not make "super profits" out of its dominance of the wholesale broadband market.
"The DCMS has not had a good enough grip on its rural broadband programme. In an attempt to reduce public costs and risk, the department has ended up stifling competition," she said.
"BT has won all 26 contracts so far. It is not much of a competition when you end up with only one supplier actively bidding in a framework, despite nine organisations being interested at the start."
BT took umbrage at its critics, claiming it is delivering "excellent value for money".
"There was strong competition when prices were set at the start of the process and that has ensured counties have benefitted from the best possible terms. Deploying fibre broadband is an expensive, long-term business so it is no surprise that others dropped out as the going got tough," it said.
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