Not so Joined Together?

Does anyone know how well the roll out of fibre (Gigabit Jersey) is going? The declared plan was to get all 42,000 domestic properties, plus businesses connected by 2016 (apparently regardless of whether they wanted to be connected!). We taxpaying public put £19million into the project, so I sincerely hope someone in the States is on top of the project plan, progress,and value for our money. My experience and intuition indicates things are perhaps not going too well.

On the recent Bank Holiday Monday we had 3 men from a contract company at our house for 2 hours. It cannot be cheap to pay contractors to work public holidays, so I'm guessing JT wouldn't unless they had to. Another small indication that things are not quite running smoothly is that they went to the wrong address initially (there is another road in the parish with the same name in common usage). Astoundingly given they were working in behalf of the 'phone company is they didn't have our line number (you know the one they were coming to work on) so they could call to locate us! Goodness knows how much more time was lost while they located the right address.

They explained they were trying to locate where the phone lines enter the house, and to do that they proposed pushing the rod from the road end and locating the point from the sound of it hitting the wall. I pointed out there wouldn't likely be much noise if the ingress was, as suspected, below the decking on the wood cladding. Besides I couldn't see the benefit as the first team who had visited had run the rod (a yellow cable like set up on a drum) from inside the house for the 40 metres I told them it would be from the DP to the road. I showed them the DP and conduit. So then they went on the locate the junction box the plan shows is somewhere in the garden garden. I told then we had had had a team up last week to do that too and they had located it in the corner of the garden. (Fortunately Helen had been here to relay that info on that occasion). After some digging about toing and froing they found the junction box and scraped a little soil from the top of it. They then informed us they would have to get a different team out to raise the box and negotiate with us to move some fencing. Net result they had replicated the work of the three previous teams and progressed the whole by the magnificent achievement of removing a couple of inches of soil from a small part of the junction box. It was quite clear they had no idea or paperwork about the previous visits or what they had done.

There's more! The Friday before they turned up we had a letter from JT asking us to confirm their given date for final installation, and saying they expected us to have completed all necessary work for their people to do the install. Bit tricky that as the JT people themselves have not yet worked out what needs doing and are going to have to send at last one more team to us to advise/agree work to be done.

I would like to say at this point that a couple of the individual technicians who tuned up in the different teams were pretty on the ball. They understood it really wasn't a good idea to run cable up the outside of wood clad buildings, especially ones on a timber frame. Everything moves, and unless you use shaped copper fixings you are likely to split the wood, and any hole lets water in and rot begin, oh and the cladding has to be replaced every 20 years or so. Definitely not the place for laser cable.

I have since discovered a couple of other things. First we are certainly not alone in having multiple teams coming each not aware of the other's work on the property. I am also told that the contractors are paid per installation, with JT picking up the problems. The contractors have a quick in quick out mindset and are looking to do the simplest, least work option possible, which of course may not be the sensible or appropriate long term option. That is quite consistent with our experience. Something I have not yet identified is whether the contractors are local companies using local people, local companies using temp off island staff, or even UK companies. I did note two of the teams who turned up here were driving local hired vehicles.

The most recent info I could find on progress was from October last year, saying they had connected 5,000 properties and were on track.

http://www.ispreview.co.uk/index.php/2013/10/jt-connect-5000-jersey-customers-fibre-optic-broadband-network.html

A previous news item in 2012 says they had connected the first 1000 customers. http://www.jtglobal.com/Jersey/super-footer/Latest-News/2012/ISLANDERS-AMONGST-FIRST-TO-SIGN-UP-FOR-THE-WORLDS-FASTEST-RESIDENTIAL-BROADBAND-/

Lets be generous and allow that was December, that means in 10 months they had connected 4000 customers. At 400 per month, it will take over 92 months to connect the remaining 37,000 residential customers. There may be some room to play depending on whether they have for example connected more businesses first. Let's say I have a few doubts about the Gigabit project being completed by 2016.

http://www.gigabitjersey.com/

https://www.gov.je/GOVERNMENT/PLANNINGPERFORMANCE/Pages/MinisterialDecisions.aspx?showreport=yes&docid=86107aec026dbbf44a1062f8ac345f9e_MDs

What is £10 million between friends?

If anyone had any doubts that our economy was struggling, multiple items of recent news should have clarified matters.  In no particular order, Funds on deposit in Guernsey down 15% last year.  Yes their economy is not a direct parallel of ours, but is is a clear indicator that things are not wonderful.  The dropping of  £75 million development in Bath street is not a good omen either.  Ostensibly concerns of the planning department approach are cited.  There may be some credibility in that given the difficulties the Coop had over their  plans, but no one I know  would drop such a scheme just on that basis. - there's too much potential  and sunk costs.  It is much more likely to be shelved because the outlook for selling/letting  space is too low to make the project attractive, possibly even non-viable.   A third strand - we hear that passenger numbers between Jersey and the Isle of Man airports are down a lot, and  the operator of the direct route is to drop it.  That is not a tourist route, the overwhelming  proportion of the passengers are people in finance and  support industries, like IT.  Then there is the leaked news from the UK Government that they intend to introduce  FACTA type obligation, coupled with the emergency meeting response of our government. In theory it is a pointless move -all those UK investors declare their taxable income to the Inland Revenue, like good subjects.  As a 'well regulated' finance centre we do the KYC checks, and we don't open accounts for people who would not dutifully declare their income, surely.  The knee jerk response rather suggest otherwise, and if that is the case, a chunk of our primary industry is  likely to be heading far to the East.

It is hardly surprising therefore that some people think the millions it will cost us to buy Plémont is too high a price.   It is certainly true the handling of the whole Plémont saga by the States has been woeful. In fact he States of Jersey has 'form' when it comes to projects around the  £10 million mark.    There was Les Pas holdings States vote for Les Pas deal  , The Millennium Town Park, and most recently the redemption of preference shares in JT. 

In the recent debate in the States on the MTFP, there was a disagreement over the redemption  of preference shares in JT.  The core of the issue was that JT have them on their books valued at  almost £30 million, whereas the States we looking to redeem for £20 million (par value I think).  The shares produce dividends of 1.8 million a year for the States, which will disappear on redemption , of course. So did we lose £10 million on the deal?  It certainly looks like a good deal for JT - they pay out £20million in cash, eliminate a book debt of £30million , and remove an ongoing obligation to pay out £1.8 million annually.

It is important to recognise that these shares are not tradable.  There is no market in them.  The value of the shares is whatever price at which the buyer and seller are both prepared to do the deal.   The Treasury Minister argued that since we own 100% of the equity of JT , it makes no difference to us - the value of the remaining shares adjusts to reflect that extra £10million on the JT books. That is true at the point the deal is done, but of course hard cash today is different from a book value tomorrow.  It only needs JT to lose a court case, or be totally out manoeuvred by a competitor to potentially lose a lot of value.

So why was  the Treasury Minister working so hard to sell us a deal that, on paper, looks rather poor for the tax payer?  The truth is he had little choice. In order to  balance his income and expenditure he had to raise that £20million. Without it there would be no money to set up the innovation fund, and some other new schemes.  By implication the Treasury Minister must be expecting the return on that fund to be somewhat more than the 9% dividend the prefs pay us. Experienced business angels can achieve returns in the order of 20%, but even so a third of their investments crash valueless.
  
One other observation about the sale of those preference shares. The special and non tradable nature of the pref shares and the States relationship  to JT over them would complicate any possibility for JT  taking on other investors. This arrangement now means the States only hold ordinary shares in JT.  In three years time the Treasury will need to raise some cash again.  Now it is not a monopoly local provider and with all the money pumped into Gigabit, and the nicely segued net £10 million on the books, a ready fattened JT will be an obvious privatisation  prospect. It might even happen sooner if we do go ahead with a new hospital.

What confuses and disappoints me is that the issue of the purchase of Plémont attracts so much comment , despite not being an economic proposition, when the redemption of the JT shares, and the arguable loss of £10 million to the tax payer attracts so little comment.  The value on Plémont is not directly economic, it is for the ecology, the space and  future generations. As with the JT shares valuation, the price of the deal is what is the issue, but that is a different matter from the value.  In granting planning permission, the Environment Minister has considerably shifted the valuation in the perspective of the sellers, and probably in the view of any independent valuer who might assess it.
Like the JT shares redemption, buying Plémont is  a one off deal.  Unlike the JT share deal it does not carry a £1.8 million a year loss of income - the maintenance once cleared is minimal.  If the land is retained in ownership of the States, albeit perhaps on loan or managed by the National Trust for Jersey, it is an asset on the books.  Contrast that with the JT shares which is actually a reduction of assets.

Finally, if the economic outlook really is a bad as the indicators I mentioned at the outset suggest, that development at Plémont is a very high risk.  The very people who might be able and interested in buying those properties are the ones at the front line of the economic decline that is heading our way. You need no such wealth or high pay to appreciate or partake of open public space. At a MTFP consultation I asked the Treasury Minister what was plan B if in the three years of the plan something  happened to throw the estimates and assumptions off.  His response was that we would not do austerity, he would look to create economic stimulus, borrowing  if necessary.  Clearly if we can contemplate borrowing to spend we can certainly afford to buy a one off asset.