Monday, March 14, 2011

BDUK second wave funding process underway

Following the "annoucement" by Chancellor George Osborne of £50m for superfast broadband on Friday 4th March 2011 (this figure was first announced when the government's superfast broadband strategy document was published last December - see this press release), the bidding process for the second wave of Broadband Delivery UK (BDUK) projects is now underway.

The first four pilot projects were announced as part of October's Comprehensive Spending Review. This set out that "£530 million will be invested over the Spending Review period to support the UK’s broadband network and to incentivise the roll out of superfast broadband in areas that the private sector would not otherwise reach." At the same time, four pilot projects were announced, in Cumbria, Herefordshire, North Yorkshire and the Highland and Islands.

So this £50m is the second tranche of the £530m total to be made available, via a bidding process managed by BDUK, guidance for which is available here. The process is open to local bodies (tier 1 local authorities and local enterprise partnerships), which will have the prime responsibility for ensuring the appropriate delivery of broadband in their areas. Central to BDUK's approach is the development of a local broadband plan, documenting the approach to be taken and the outcomes to be achieved. In addition to developing the plan, local bodies are responsible for the following:
  • securing investment – from BDUK, as well as from additional public, private and European sources;
  • design, procurement and implementation; 
  • ensuring the appropriate state aid approvals and clearances (with support from BDUK);
  • demand registration and stimulation;
  • monitoring outcomes and benefits realisation activities.
BDUK state in their pilot projects FAQ that "we have indicated that we will allocate £5m to £10m to each project, but the final number has yet to be decided and would be subject to a process of due diligence." So a not unreasonable assumption would be that a similar level of funding (with the above caveats) will be availble for projects successful in this second wave? BDUK's bidding guidance is silent on this, also on the number of awards to be made in this second wave ("BDUK will select a number of successful bids"), other than to say that:
"The bid for funding should sit within a BDUK advised notional grant of £60 per premise, which can be flexed to take account of factors such as topography, population density and network architecture. BDUK is currently agreeing a funding allocation approach and expects to be in a position to confirm an indicative budget for BDUK funding allocations to local bodies on submission of their bids. BDUK would also be able to provide an indicator of what type/scale of requirement its modeling suggests may be feasible, within an overall budget that includes an assumption of additional public sector funding (arranged by the local body) and private sector funding (from a successful supplier) available."
The guidance also flags the importance of securing funding additional to that being made available by BDUK:
"BDUK wishes to see local commitment to the proposed project. All bids must therefore include a local financial contribution towards the overall costs of the measures put forward. Bids must identify whether the local contribution will come from local authority sources or external partners such as health authorities as well as the private sector. They should also describe whether any local contributions are in the form of a pure capital contribution to the overall subsidy or whether they are based on guaranteed public sector demand as an ‘anchor customer’ for the project. BDUK would welcome capital contributions from local bodies towards the cost of their broadband projects based on an ‘invest to save’ business case (for example, through the achievement of lower transaction costs as a result of increased customer interaction via the web). The greater the overall contribution towards the costs (both in terms of capital and revenue funding) from local authorities and other local bodies as well as other external organisations, the more positively the bid will be considered in the assessment process."
This reinforces that the funding available through BDUK will not of itself be sufficient to provision superfast broadband; rather, it is the intention that the funding should provide a stimulus to support additional public and private investment, including from European funding sources. There is also an expectation that bidders in this round will be at an advanced stage of readiness in terms of their capacity to make use of the funding:
“Local Authorities and other Local Bodies who are considering submitting a bid as part of this award round should have already undertaken much of the preparatory groundwork to develop a Local Broadband Plan, prior to the issuing of this guidance. Key plans should be in place which have been developed in collaboration with a range of stakeholders including local communities and reflect both requirements for speed and coverage.”
Re-use of existing broadband infrastructure is also an important consideration for bidders:
“Local bodies should consider the re-use of existing public sector networks as part of the solution where they provide an efficient means of improving household connectivity. Where appropriate, local bodies should describe how they intend to use their existing investments in public sector networks as well as how partnerships with the wider public sector (for example police and health) can be used to leverage the best superfast broadband upgrades for their community.”
It's interesting to compare the bidding guidance's advice in relation to state aid with what's said in the government's strategy document, published last December. Here's what the strategy has to say:
"BDUK is working with the BIS State aid unit and engaging with the Commission to understand the scope for a UK wide State aid notification and clearance. Previously approved umbrella schemes (e.g. in Germany) appear to have been based on a fairly prescriptive and regulated framework and it remains to be seen if the level of flexibility required by the UK’s current policy of decentralisation can be made compatible with the Commission’s requirements for an umbrella approach. Since BDUK will recommend standardised commercial models and templates, local bodies taking the lead on broadband will be encouraged to innovate, and projects will be tailored and based on a range of possible commercial and delivery approaches, solutions and models to take account of specific local objectives, funding sources, etc. In the meantime and pending approval of any umbrella scheme in the UK, BDUK intends to develop a single State aid notification for the Superfast broadband pilots and to promote a more consistent approach to State aid notifications to help reduce the Commission’s case load generated by the UK. To this end, BDUK is developing a State aid template notification. This template will greatly reduce the effort and uncertainty for local bodies’ state aid notifications. BDUK will also be producing supporting guidance on key issues such as the re-use of public sector networks, and intends to provide other tools (e.g. central mapping data, recommended commercial/delivery/sourcing/ procurement models and processes), support and expertise."
In contrast, BDUK's bidding guidance states that one of the responsibilities of bidding local bodies is "managing applications for State Aid clearance, with support from BDUK", with bidders advised to consult the EU's revised state aid guidelines on broadband networks (more on state aid in this previous post), applying to the EU for clearance if necessary. The nature of the support BDUK will provide to bidders in this regard isn't specified any further in the guidance, nor is any reference made to the approaches to managing state aid issues described in the government's strategy document.

So...does this mean that the UK wide umbrella scheme and state aid template notification mentioned in the strategy document are no longer being considered? Or is it more simply that these measures won't be in place in time to support this second funding round? Or am I putting two and two together to make five here?

Local bodies intending to submit bids as part of this funding round need to inform BDUK of their intention to do so by 25th March 2011. The closing date for the submission of bids (in the form of a local broadband plan, a template for which has been provided by BDUK) is 18th April 2011, with the announcement of successful bids on 27th May 2011.

1 comment:

  1. Surely bidders need to know the intentions of BT in the next 5 years?