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The announcement of BT’s PIA (Physical Infrastructure Access) pricing last week appears to have had some severe affects on the BDUK (Broadband Development UK) and their plans for hitting the Government’s superfast broadband targets.

Neil Watson, Head of Service Operations

Neil Watson, Head of Service Operations

Geo Networks announced that they will be withdrawing from the BDUK bids due to issues with BT’s PIA pricing and flexibility. Chris Smedley of Geo Networks said: “Whilst pricing may have reduced for the current PIA product (still not far enough in our view), the real issue is that it can only be used for providing the final drop from local exchange to a residential broadband consumer’s house. PIA cannot be used for the far more costly task of crossing the long distances in rural areas to get to these remote communities (backhaul) – making the idea of being able to build new fibre connections within them faintly ludicrous.

It cannot be used to connect mobile or wireless infrastructure (a critical way of quickly rolling out competitive services in hard to reach geographies) and it cannot be used to provide leased lines to businesses. Quite simply, our business case does not stack up because of these restrictions.”

Rumours are also rife that C&W have also withdrawn from BDUK bidding, while BT have responded by applauding the progress Fujitsu are making with regards to fibre networks.  Liv Garfield from Openreach claimed the company had received “positive feedback about its PIA products from would-be wholesale customers.” But then they would say that, wouldn’t they.

What does this mean for the BDUK?
This has obvious and severe implications for the BDUK who are making £530million of funding available to deliver superfast broadband to the homes and businesses within the UK that the broadband market would not normally cater for.

The importance of the BDUK and the Government’s plans for superfast broadband have already helped sway Ofcom to force BT to reduce its original PIA pricing but Geo Networks (and other potential suppliers) believe this has not gone far enough and their withdrawal from future bids has serious implications for the delivery of superfast broadband to rural and hard to reach locations. This means the BDUK are likely to become more reliant on the main existing broadband network providers such as BT and Virgin Media to reach the last third, which has obvious negative implications on competition within the market.

But it’s not just the providers that are opting out of BDUK. It appears some council’s also have reservations. It’s reported that the council for Bath and North East Somerset have decided not to use the BDUK’s £670,000 funding which would then require the council to invest £1million of their own money in order to fund superfast broadband roll-out throughout the area because it’s too expensive. Instead they are looking to invest just £25,000 to look into other ways to improve broadband across the area. The details of those plans have not been released. Now INCA, the Independent Networks Cooperative Association, has stepped in to add its viewpoint, urging the Government to review its approach to funding national next generation rollouts before the participation of more operators is lost.

The obvious concern is that councils and providers will start to lose interest and faith in the BDUK’s ability to deliver superfast broadband to the remaining third as the Government plans and that this could result in a broadened digital divide as the rest of the country presses ahead with superfast broadband.

However, whilst the loss of Geo Networks and C&W is significant we think the BDUK will continue to find new potential network providers. Furthermore, although the effect of the PIA pricing will be important, the BDUK are already investigating alternative delivery methods to reach the more rural areas such as satellite. So, even though this news is concerning for ISPs targeting communities within the last third, there remain plenty of other options, albeit they may rely on the larger providers such as BT and Virgin Media or on alternative technologies such as satellite.

Updated: 29th November 2011

The latest news about BDUK’s Scottish Highlands and Islands bids for superfast broadband becoming a one-horse race (BT) might at first seem to echo the problem seen elsewhere. However, in North Yorkshire it’s a different story. The Connecting North Yorkshire initiative will see two isolated villages gain access to faster Internet services using a mixture of fibre and Wi-Fi technologies based on funding from the BDUK.

There could be further good news for the BDUK this week with rumours that the Chancellor, George Osborne, is about to announce a further £5billion investment into superfast broadband as part of the National Infrastructure Programme (NIP) which covers education, transport and broadband. The additional funding is expected to be announced later today.

Have your say!

As a reseller, what are your thoughts on this issue? Do you think BT’s PIA pricing is fair or should they be forced to reduce their prices further? Are you confident the BDUK will achieve their aims? Let us know your opinions by leaving us a comment below.

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