Rural dwellers say they want the same broadband speeds as those living in cities The taxpayer is being "ripped off" over the cost of rolling out broadband to rural areas of the UK, MPs have said.The Commons Public Accounts Committee (PAC) says the government "mismanaged" the project by awarding all 26 rural broadband contracts to BT.
It also said BT had "exploited its quasi-monopoly position" as the main provider.
The government defended the process as fair, while BT said it was "disturbed" by the claims which were "wrong".
'Failed to deliver'Making sure that those living in the countryside get broadband speeds comparable to those living in towns and cities has long been something the government has grappled with.
Commercial firms such as Virgin Media and BT see little profit in rolling out services to areas with few people living in them.
Public Accounts Committee chairwoman Margaret Hodge said taxpayers had been ''fleeced''So, as an incentive, the government provided a subsidy pot of £230m, with an extra £250m available after 2015, and awarded contracts on a county-by-county basis. Each county also contributed funds to bring superfast broadband to their areas.
But only Fujitsu and BT entered the bidding competition, with Fujitsu later withdrawing.
BT has so far been chosen in 26 counties and is expected to win the 18 remaining contracts. The company has said it will commit £2.5bn to the project.
The report by the PAC criticised the government's management of the project: "The Department for Culture, Media and Sport's design of the rural broadband programme has failed to deliver the intended competition for contracts, with the result that BT has strengthened its already strong position in the market."
It said that its contract terms were "overly generous" to BT and did not "promote value for money".
It also accused the department of failing to check that BT's bids were reasonably priced and said there had been "wildly inaccurate" estimates of costs.
Continue reading the main story Denmark plans to have 100 megabits per second to all by 2020 Estonia wants 100Mbps for everyone by 2015France plans almost universal coverage at 100Mbps by 2020Germany expects to have around 70% coverage at 50Mbps by 2014Greece wants 100% of citizens to have access to 30Mbps by 2020Ireland plans 100Mbps for all by 2020Italy wants to see half of its citizens have access to 100Mbps by 2020The UK's target is 90% coverage by 2017 but at the lower speed of 24Mbps"Local authorities are contributing over £230m more to the programme than the department assumed in its 2011 business case and BT over £200m less, yet BT will ultimately benefit from £1.2bn of public funding," the report said.Margaret Hodge, the committee chair, added: "The taxpayer has been ripped off with £1.2bn going to the shareholders of BT."
She said: "If you (the government) had devised it differently, had bigger areas for the contracts so you could spread your costs more, allowed different technologies to be used and insisted on a 100% coverage, we would have found other people in the game and I bet we would have spent less of the taxpayers money."
Media minister Ed Vaizey told BBC Radio 4's Today programme the costs were "not out of control" and said BT was "putting up more than a third of the costs of rural broadband".
"BT is delivering under our scheme to up to 10,000 homes now; it will deliver to millions of people over the next two years with the best value for money, government-sponsored broadband scheme you will pretty much find anywhere in the world."
Culture Minister Ed Vaizey said the broadband programme is ''very good value for money''He said only BT and Virgin had the infrastructure to roll out the broadband, and that Virgin did not want to open their cable up for other companies to use whereas many companies use BT.
'Transparent from start'BT was further criticised in the report for failing to provide local authorities with full information about where exactly it would roll out superfast broadband services, which in turn hampered rivals from drawing up alternatives.
And it was criticised for including a clause in its contract that prevented the local authority it was dealing with from disclosing the costs involved to other authorities negotiating contracts.
This lack of transparency meant the company "exploited its quasi-monopoly position" to limit access to both the wholesale and retail market "to the detriment of the consumer", concluded the report.
BT said it was disturbed by the report, "which we believe is simply wrong and fails to take on board a point-by-point correction we sent to the committee several weeks ago".
It added: "We have been transparent from the start and willing to invest when others have not.
"It is therefore mystifying that we are being criticised for accepting onerous terms in exchange for public subsidy - terms which drove others away."
It denied it had failed to deliver value for money for the taxpayer and said that, even with the public subsidies, it would take it 15 years to pay back its investment in rural broadband.
"Rolling out fibre is an expensive and complex business," it said.
BT has rolled out superfast broadband in Cornwall, using existing telephone wires The report recommended the government should, as a matter of urgency, publish BT's detailed rollout plans so other suppliers could offer services to the final 10% of the population that would not be covered under current plans.
'EU failures'It said the DCMS should not spend any more money until "it has developed approaches to secure proper competition and value for money".
In 2011, then Culture Secretary Jeremy Hunt announced 90% of premises in every local authority area of the UK should have access to internet speeds above 24 megabits per second by May 2015, with a minimum of 2Mbps for others.
The process has suffered huge delays and is due to be completed in 2017, nearly two years later than planned.
But, according to Ovum analyst Matthew Howett, the delays were more down to the EU's failure to approve the scheme rather than to the UK government.
"The challenges of deploying to the most rural and remote areas of the UK shouldn't be underestimated and you have to wonder whether there are many providers other than BT who would've been able to overcome some of the engineering challenges," he said.
"If we could roll out rural broadband using reports, inquiries and investigations, the UK would probably have the fastest broadband in the world."
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