05/07/2013 04:23 BST | Updated 03/09/2013 06:12 BST

Superfast Rural Broadband Behind Schedule, Lacks True Competition Says National Audit Office

The government programme to roll out superfast broadband to 90% of the population is running late and lacks strong competition to protect public value, the National Audit Office has reported.

The government has already announced that superfast broadband will reach 95% of the population by 2017, two years after the original target of reaching 90% by 2015.

Just nine out of 44 local projects are expected to reach the original target, according to the NAO report, with the delay partly attributed to the EU State Aid process taking six months longer than expected.

The NAO also said that competition among suppliers had been "limited", leaving BT as the only active participant and expected to win all 44 local projects.

It warned that the Department for Culture, Media and Sport (DCMS) had "secured only limited transparency" over the costs in BT's bids.

And it said the DCMS now expected BT to provide just 23% of the overall projected funding of £1.5 billion, some £207 million less than expected.

Amyas Morse, head of the NAO, said: "The rural broadband project is moving forward late and without the benefit of strong competition to protect public value.

"For this we will have to rely on the department's active use of the controls it has negotiated and strong supervision by Ofcom."

Public Accounts Committee chairwoman Margaret Hodge said. "The DCMS has not had a good enough grip on its rural broadband programme.

"The programme won't now be delivered until March 2017, nearly two years late.

"The department wanted the private sector to foot 36% of the bill for the £1.2 billion rural broadband programme, but it is now expected to contribute just 23%, leaving the public sector purse to cover the rest."

A DCMS spokesperson said:

"We have noted the NAO report and welcome its confirmation that processes we have put in place to ensure value for money are strong and robust.

"We agree that effective enforcement of the contracts is important and are working with local authorities to ensure this.

"As the NAO report makes clear, the project's funding model greatly reduced the cost and financial risk to the taxpayer.

"Government is delivering a transformation in broadband and already 100,000 more homes and businesses are getting access to superfast broadband each week.

"Around 88% of the country will have access to superfast broadband by December 2015, with an estimated 90% getting superfast coverage by early 2016.

"An extra £250 million of investment means we will reach 95% of premises by 2017 and we are now exploring with industry how to expand coverage further, using more innovative fixed, wireless and mobile broadband solutions, to reach at least 99% of premises in the UK by 2018."

A BT spokesman said: "BT's fibre programme has been one of the most efficient in the world with the company going further and faster than industry experts thought possible.

"BT has applied these cost efficiencies to its Broadband Delivery UK work and so the company 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 benefited from the best possible terms.

"Deploying fibre broadband is an expensive long-term business and so it was no surprise that others dropped out as the going got tough.

"BT on the other hand has stayed the course and invested significant sums in rural Britain even though the payback period in such areas is longer than in the first two-thirds of the UK which has been funded by BT alone."

Communications minister Ed Vaizey said the Government had "under-promised and are going to over-deliver" on the broadband programme, because it will connect 92% of homes on a budget originally intended to reach 90%.

Vaizey told BBC Radio 4's Today: "We said we would do it by 2015. By the end of 2015, we will have delivered to 88%. By early 2016, we'll get to 90%, and by the end of the programme we will get to 92%.

"BT is delivering the fastest roll-out of superfast broadband anywhere in the world, with 100,000 premises being passed every week. Its commercial roll-out is 18 months ahead of schedule.

"With our own programme, we are going to exceed our target of 90%, we are going to get to 92% and we are investing an additional £250 million, which will get us to at least 95%."