Ed Vaizey Talks BT's "quiet life" Option and Contracts by Broadband Speed - ISPreview UK
The Digital Economy Minister, Ed Vaizey, has warned critics of BT’s dominance in the national Broadband Delivery UK programme that the operator could have simply opted for the “quiet life” by not bidding for any contracts. The minister also floated the idea of ISPs offering different broadband packages for areas that suffer from slow speeds.

At present the £1.7bn+ BDUK scheme aims to ensure that 95% of people can gain access to a fixed line superfast broadband (24Mbps+) service by 2017, although the programme has often been criticised for awarding almost every single one of its related contracts to BT.

Naturally this same issue cropped up again during Wednesday’s rural broadband debate at Westminster Hall (details), which saw Ed Vaizey defend the scheme by warning that the alternative might have been worse.

Ed Vaizey said:

We should remember that when we are busily kicking BT, which we do in all these debates, for a quiet life BT might not bid for any of these contracts … [they are] free to bid or not to bid, and it is free to say to a contracting authority that it wants to use the framework contract to save time and make life more efficient, and that if the authority is going to use a different contract it will not bid. That is entirely up to BT and I do not think that is anti-competitive behaviour.”

It’s true that BT doesn’t strictly have to bid, although admittedly that might not have been all bad for some areas where there are well established alternative operators that could have taken on the mantle if allowed (we suspect that Gigaclear and B4RN would certainly have relished just such an opportunity).

But most local authority areas don’t have a viable alternative, at least not one that could operate on the right scale and to the right budget, while also providing financial and timescale security. Meanwhile starting one from scratch is often seen by councils as being too risky, particularly during periods of austerity and in the wake of South Yorkshire’s £150m Digital Region fiasco.

On the other hand it should be remembered that by not bidding BT would be leaving itself vulnerable to future competitors. On top of that, who wouldn’t want a big hand-out of cash to help cover the costs of deploying a major infrastructure upgrade, which is helping to protect BT’s existing platform against competition.

Contracts by Broadband Speed

The same debate also saw Vaizey react to some voices of frustration from those who live in “slow spots” and feel it unfair that they have to pay the same price, or sometimes more, in order to receive an often significantly slower broadband service than those in areas where faster connectivity is available.

It’s of course quite well known that some ISPs charge rural consumers more, often because their cheaper to run unbundled (LLU) networks don’t extend that far and so they have to use BT’s more expensive platform.

Prices also tend to be lower in areas where BT has competition from several primary ISPs and higher in those where BT is the only operator, which is partly related to Ofcom’s regulatory model (note: arguably the prices might be even higher if Ofcom didn’t intervene). As a result some ISPs, such as PlusNet, also charge more in areas where BT’s platform is the only one available (usually reflects the last 10% or so of UK premises).

In response Vaizey pointed out that this was a contractual matter for ISPs and their customers, although he also said that the issue would be taken “seriously” and proposed a new approach.

Ed Vaizey said:

I want to look at whether we can have different levels of contracts for people who clearly receive slower speeds.”
It’s important to keep this in context with the above situation because most ISPs already charge more for faster speed packages, although Vaizey is referencing the particular issue experienced in areas were slow speeds are the ONLY option.

But we’re unsure how such a contract would work in practice. The fact is that it costs operators more to cater for rural areas because smaller populations dictate a slower return on any investment (e.g. spending £40k to upgrade connections for 1,000 premises vs spending the same amount on 200 premises). Like it or not that investment has to be returned or it becomes unviable and nothing gets done.

At this point some people might ponder whether areas funded by the BDUK scheme should pay less due to the BT subsidy, although most of those locations would now have faster speeds and cutting prices could also harm the private investment side of this equation; potentially limiting future investment and thus coverage or performance.

As such Vaizey will need to be careful that in pushing for lower prices (the UK market is already fairly cheap compared to other countries) he doesn’t inadvertently risk making a change that actually harms the related case for improving coverage and performance.

SIDE NOTE: It seems they forgot the “up to” in that 80Mbps sign picture (top left), which shows Ed Vaizey as second from the left.