BT and Virgin sue over £10m state-funded Birmingham broadband
Telcos: 'New broadband service is a dangerous precedent'
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BT and Virgin Media have thrown another legal block in front of a £10m investment in Birmingham's broadband infrastructure.
The two telcos are dragging Birmingham City Council back to the European Commission by challenging a decision to allow the City council to improve broadband pipes. It means that the £10m investment plan in Birmingham's broadband will be delayed, if not dropped.
Virgin and BT allege that that public money will skew the private market and undercut their own investment in Birmingham.
The £10m that the council planned to plough into Birmingham's broadband comes from a £150m pot that George Osborne set aside to fund broadband in 20 cities across the UK, part of his "super-connected cities" initiative. In Birmingham the cash was intended in particular to help small biz in the Digbeth, Eastside and The Jewellery Quarter areas of the city by providing them with affordable high speed broadband.
Birmingham City Council accused BT and Virgin Media of standing in the way of 1,000 new jobs and an estimated £200m yearly benefit that the service would create.
Councillor James McKay said he was "extremely disappointed" by Virgin's new lawsuit, because the Council had consulted extensively with VM to prove that the market alone couldn't provide the service:
The city has worked in a very positive and collaborative way with them over the last few years to help inform and develop our business case and we are surprised that they have now chosen to appeal at such a late stage.
We developed a robust State Aid case, based heavily on evidence that Virgin Media and others provided to us that clearly demonstrates a strong market failure.
BT said that the decision to allow government money into a private market is "substantially flawed":
It would have discouraged commercial investment in high speed networks at precisely the time when such investment is required. It would also have set a dangerous precedent. We hope an alternative solution can be found as soon as possible so that companies such as BT can invest further in Britain’s cities.
Virgin Media spokespeople argued that the planned investment was being made in the wrong place:
We fully support the Urban Broadband Fund and government ambitions to bring superfast broadband to areas not currently served by existing fibre networks. So it’s disappointing that Birmingham City Council has put forward a scheme which is not in the interests of local people and we believe, as a result, the European Commission has made a decision based on inaccurate and misleading information which could waste public money.
Birmingham Council got the go-ahead from the EC last month, the challenge by BT and Virgin was decided last week and has come to light today.
The ruling could affect other cities in line for a broadband handout - including Belfast, Manchester and Bristol. ®
COMMENTS
@AC 13:56
"Then give VM back the £10+billion they invested in fibre infrastructure in the 1990s."
I live in a medium sized market town in the middle of England, and no-one spent a penny on (or in other words, gave a sh*t about - see what I did there?) providing me with fibre infrastructure. So VM can go and boil their bottoms on this one.
I recently watched Orange/TMobile/EverythingEverywhere's promo vid for their 4G launch, and the message can be roughly paraphrased as "If you already live/work in a place where you can have a fast internet connection, we can sell you a faster one. But if you live somewhere too sparsely populated for anyone to have cared about you before, don't expect anyone to start caring any time soon."
The infrastructure does need nationalising, but the nature of any payback to the current owners should reflect the disparity in provision which they have created and perpatuated, as well as the outrageously knock-down price some of them (BT, for those too young to remember) paid for it in the first place. They only invested where they could make a profit, and they've had a jolly good long run at doing so - especially BT, who simply haven't had to compete at all in vast swathes of the country.
The time when anyone believed that a free market delivers the best service in an infrastructure-based natural monopoly is surely long gone, and these people need telling that they've had all we feel like giving them. It's time we took back what we built and paid for in the first place, and told them to sod off and find some other developing country to exploit.
And if they think that's a bad deal, they're welcome to dig up all their jolly-expensive fibre and take it with them. It won't make any difference to me, except that without it I'll be competing on a level playing field with city-based businesses who currently benefit from fibre connectivity but usually pay less for it than I pay for ADSL.
Oh dear, I think I forgot to take my dried frog pills this morning. Nurse??
Re: @AC 13:56
"The time when anyone believed that a free market delivers the best service in an infrastructure-based natural monopoly is surely long gone."
You might want to tell the many morons in the Treasury who still believe that article of faith about the evidence that proves they're wrong.
But - ahem - free markets aren't about service provision, and never were. That was just a lie to sell privatisation to a snoozy public.
Free markets are mostly about extracting as much cash from their victims as possible, while providing the minimum possible level of service and long-term investment.
Occasionally you'll find a UK company that bucks that trend. But cconsidering the sorry state of our telecom infrastructure and the wretchedly abusive customer service doled out to the public by our leading telcos, it's clearly never been about making the UK better at these things.
Compare with Sth Korea where the government pumped in a relatively paltry few billion but also guaranteed loans of around $20bn for investment.
Net result - some of the best broadband in the world, at very little actual cost to the public.
It wouldn't happen here - not because of the financials, but because the critical question for UK pols is always 'How can I use this to make money for myself and my school chums?"
Re: something is amiss here....
The NHS is a crap example - see the US for details.....
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