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November 30, 2015

Virgin Media slams BDUK in EC letter

News: Cable group raises questions over Government subsidies to BT.

By Alexander Sword

Virgin Media has appealed to the European Commission over UK Government subsidies to BT, arguing that they do not provide value for money to the taxpayer.

The cable operator claimed that the Government’s £1.6 billion investment in the Broadband Delivery UK (BDUK) programme, which aims to extend superfast broadband to 95 percent of the UK, is not necessary.

BT has been the main supplier for BDUK, while in the letter seen by the Financial Times, Virgin Media argued that if the subsidies were removed other providers would invest on a commercial basis without state aid.

However, Virgin Media argued that if state money was needed it should be used to facilitate demand or provide satellite equipment.

The letter said that "if extended, these irregularities will give rise to an unacceptable risk of overbuild of existing networks, the crowding out of private investment, disincentives for future network expansion and, ultimately, the unnecessary granting of aid".

A BT spokesperson responded, saying:

"It is disappointing that Virgin Media are seeking to derail a successful project that is delivering fibre broadband to millions of rural homes and businesses.

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"They have shown little or no interest in these rural areas to date and so their intervention is unlikely to be welcomed.

"Virgin appear to have little grasp of how the project works as BT cannot make excess returns under the contracts and the seven year period for gainshare is set under EU aid law. It is also the case that any higher returns are not split on a 50/50 basis. In fact, the majority of those funds will be returned to the public sector to improve coverage even further."

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