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Friday, 15 April 2011

Too long in PFI land

There was a time when the UK arm of Fujitsu was known as ICL and they made their own computers. They didn't work as well as their American cousins' machines, but they were British, and as a result they won a lot of government contracts and they collected their fair share of bearded wierdy graduates to feed their business. Then they were taken over by the Japanese firm Fujitsu who didn't exactly bring the complete range of IT services that they might have found with IBM or Digital, but enough to allow Fujitsu to bid for more government work, which has been the mainstay of their business ever since.

But old habits die hard, so when Fujitsu announced that they were forming a collaboration with Virgin Media, TalkTalk and Cisco to build a new super-fast fibre network capable of delivering Internet speeds of 1 Gbps and upwards to 5mn homes in rural Britain, the press went hoop-la. But a little digging (excuse the pun) shows that although Fujitsu talk about spending up to £2 billion on the project, the first precondition is that they should be given £500 million of the £530 million that the government had set aside for national rural broadband, with no commitment as to how much this would cover and actually no commitment on their part to actually spend any money.

Then we hear from the spokesman of their partner at Virgin Media that the group would like to be granted better terms on the poles and ducts network that earlier governments had "given" to BT. Well, no it didn't pal. When the government owned the telephone part of the Post Office, it generated a profit for the government and funded the expansion of the network itself. BT was then sold to private investors (who in inflation adjusted terms paid about the same as today's market cap), so if you want to use the network, you can pay a commercial rate to the people who bought it.

But going back to Fujitsu's comment that their network roll out will cost up to £2 billion. Does anybody think they are going to invest anything like "up to £2 billion" when the turnover of the UK subsidiary is only £1.7 billion? Not without a lot more government money, and as anyone who has read broadband service claims will appreciate, these days "up to" translates roughly as "at most 15% of".

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