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Council Chief Exec labels Virgin and BT “oligarchs”

Council Chief Exec labels Virgin and BT “oligarchs”

🕔15.Aug 2013

Stephen Hughes has launched a highly unusual intervention for a senior local government officer in the ongoing battle between Birmingham City Council and the two broadband giants as their legal objections hold back plans to build a super-fast 100+Mbps (megabits per second) network.

In an article in the Local Government Chronicle the Birmingham City Council Chief Executive described BT and Virgin as “virtual monopolies” of the fibre network and referred to them as “oligrachs” which it consulted when putting together a case to the EU.

Birmingham was on the original list of 10 UK destinations set to benefit initially from a £150m UK government fund to create “super-connected” cities. The council also successfully applied for European Commission State Aid funding for the scheme.

The plans had promised to reach 1.7 million households and 200,000 premises by 2015, in particular giving a boost to small businesses in Digbeth, Eastside and the Jewellery Quarter areas of the city by providing them with affordable high speed broadband.

BT and Virgin media objected on the grounds of “significant over-build”, stating the plans were “not in the interests of local people” and “could waste public money.” They also stated that the plans would have curbed commercial investment and set a dangerous precedent of government intervention.

James McKay signalled his frustration with the providers branding the moves “surprising” considering the “robust State Aid case” put forward and the “evidence that Virgin Media and others provided to us that clearly demonstrates a strong market failure.”

In response to the objections, Birmingham City Council agreed to Whitehall proposals for a £90 million of voucher scheme made available to businesses with less than 250 employees. However, this compromise will only see connection speeds of 30 Mbps, well short of the 100 mark.

Hughes states that: “….the UK is falling badly behind in this area, to an extent that is almost scandalous.” He goes on to say: “Our optical fibre penetration is now behind that of Lithuania, Turkey and Romania as well as most mature economies…We are throwing massive economic opportunities away while the rest of the world is overtaking us. ”

In this latest intervention, Hughes builds on the criticism from McKay, saying that while Birmingham City Council agreed to the voucher scheme to make some progress in improving broadband connectivity it essentially “allowed BT and Virgin to charge monopoly prices to SMEs” and “instead of providing a cheap network we are subsidising two huge corporations to give the appearance of lower entry costs.”

Like many local government officers, even the Chief Executive of Europe’s largest metropolitan authority, Hughes mostly leaves the politicians to make public arguments.  However, his profile increased dramatically during the 2010-2012 period when he became a public figurehead for outlining the impact huge public expenditure cuts would have on the council and Birmingham.

Stephen Hughes has been at the helm of the Council for 8 years, a long tenure for the position and he is unlikely to over-step the boundary without a strong consensus within the Council.

The Council boss used the article to explain the importance of fast internet, akin to the investments of previous centuries in toll roads, canals, railways, motorways, telephones and energy supplies. “What’s the message in all this? Well it’s almost trite to point out that the internet is the network of the 21st century – especially so for economies such as the UK’s, which is highly dependent on high value added activities.”

 

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