Out-Law News 1 min. read

Clawback mechanism helps government reinvest in 'superfast' broadband initiative

The UK government has committed a further £442 million to its 'superfast' broadband project, with the majority of funds stemming from a clawback mechanism included in contracts for the delivery of superfast broadband services.

The Department of Culture, Media and Sport (DCMS) said £292 million of the £442m total would come from money returned to the government from BT under the terms of its contract for supplying access to superfast broadband services to homes and businesses across the UK.

Superfast broadband generally refers to services with download speeds of at least 24 Mbps.

Expert in telecoms contracts Simon Colvin of Pinsent Masons, the law firm behind Out-Law.com, which advises DCMS, said the clawback mechanism was introduced by the government to enable payback to the public purse of additional money BT might otherwise make from superfast broadband customers for higher-than-anticipated take-up of services from home owners and businesses.

"The mechanism that was created by the public sector has proven robust and demonstrated the ability to fund additional superfast broadband coverage through private sector funds rather than through having to necessarily dip into the public purse," Colvin said.

In its statement, DCMS said more than £150m of savings from 44 superfast broadband projects across the UK would be added to the £292m recovered through clawbacks to help deliver access to superfast broadband services to approximately 600,000 homes and businesses in rural areas of the country. The additional savings stemmed from "careful contract management by the government, local authorities and BT", DCMS said.

The government has committed to delivering “near universal superfast broadband” across UK homes before the next general election in 2020. It follows earlier pledges by the previous coalition government to ensure that superfast broadband services are available to at least 90% of the UK by the end of 2015 and 95% of the UK by the end of 2017.

The government has met the 90% coverage target, DCMS said in its latest statement.

"Around 4.5million premises have been given access to superfast broadband through the government’s £1.7 billion Broadband Delivery UK rollout, with more than 1.5 million signing up for a faster connection. It means more than 90% of the UK can now get superfast broadband – up from 45% in 2010."

Culture secretary Karen Bradley said: "Broadband speeds aren’t boosted automatically – it needs people to sign up. Increasing take-up is a win-win-win: consumers get a better service, it encourages providers to invest, and when more people sign up in BDUK areas, money is clawed back to pay for more connections."

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