BT denies overcharging for rural broadband rollout

BT has dismissed claims that it has been artificially inflating the costs of rolling out super-fast broadband in rural areas of the country.

According to a leaked Whitehall document seen by The Daily Telegraph, BT is charging a mark up of up to 80% to bring faster internet access to people living in some parts of the countryside.

The document accuses BT of using “pseudo wholesale” figures to justify its costs, and says that if the telecoms giant’s subsidy was cut by between £400 and £500 million the result would be the same.

The government is currently investing £1 billion in bringing faster broadband access to areas of the country where coverage is particularly bad. Half of the money (£530 million) is coming from central government and the other half from levies on people’s council tax bills.

Although nine networking companies were originally picked to compete under the Broadband Delivery UK (BDUK) framework, BT is the only party that has so far won any regional tender.

The consultant behind the report claims that, in “generic” rural areas, BT is charging £17,000 to install a street cabinet that costs the company just £11,689 “before group costs”. The charge increases to £21,858 in ‘very’ rural areas and £30,000 in the most rural areas of the UK.

Labour and “overhead charges” are also more expensive in more remote areas, according to the report.

“In attempting to establish a wholesale price, there has been significant inflation of costs by adding new job types and not reducing costs where these job types had already been accounted,” said the document.

“BT’s model is abstract in nature, aiming at establishing a wholesale price, and a history for the price and methodology, rather than revealing unit costs of components.”

Responding to the allegations, BT said the claims were “ludicrous”.

“BT is winning BDUK tenders precisely because it is committing extra funds to improve broadband access in those counties. These funds are in addition to our commercial investment of £2.5 billion,” it said.

“It is ludicrous that some people are suggesting that we are trying to pass on the full cost of deployment to our public sector partners. In fact, we are looking at a low double digit year payback in these areas even when the public funds are taken into account.”

However, chairman of the Public Accounts Committee, Margaret Hodge MP, has sent a copy of the document to the head of the National Audit Office (NAO), calling for an investigation into the claims.

“This looks like another example of a lack of transparency by a private company providing a public service potentially allowing the taxpayer to be ripped off,” Hodge reportedly said in her letter to the NAO.

“Taxpayers are paying £1 billion for the roll-out of high speed broadband across the UK, an essential service that people cannot do without, and it appears from this document that BT may have exploited its monopoly position.”

Earlier this year, a report by the Country, Land & Business Association (CLA) revealed that the UK government is likely to miss its deadline to provide super-fast broadband to 90 percent of the UK by 2015.

It could also fail in its bid to make 2Mbps speeds available to every home and business in the UK – including those in rural areas – according to the report.

The CLA said it was concerned the slow funding process and a reliance on fibre optic networks were prolonging the rural-urban digital divide, adding that the BDUK is too bureaucratic and the allocation of government funding too slow.