School broadband - rich pickings?

Earlier this week I wrote about the efforts by the council-backed London Grid for Learning to stave off competition from rival broadband suppliers. The story certainly caused a stir in the education technology world.

Some people got in touch to complain that they too had experienced similar high pressure tactics in trying to get schools to stay with the existing council supplier - not just in London but across the UK.

One supplier, Schools Broadband, told me: "We find that the majority of local authorities do not welcome competition from commercial providers. We have seen many different scaremongering tactics from local authorities as to why schools should not use a competitor's services."

But I also received some messages supporting LGfL. A head of ICT in Camden forwarded me the email he had sent to his colleagues after our report, explaining why he had renewed the school's broadband contract with the consortium. In it, he maintains that London Grid offers a service that is technically superior to that promised by rivals and he backs its chief executive Brian Durrant. The email ends: "I fully support any moves to persuade schools not to be seduced into plausible errors."

Mr Durrant himself has told us he believes we have misrepresented the savings schools might make by switching to different suppliers. He asserts that rivals like Exa are offering an inferior product compared to the fibre-to-the-premises uncontended service that London Grid provides.

Both Exa Networks and Schools Broadband deny that.

Beyond the arguments over technology and prices, LGfL has also stressed its non-profit status in selling its services to schools, claiming that this enables it to invest in their future, unlike a commercial business. But while the Grid is a charitable trust, the two businesses which are its main suppliers appear to be making a healthy return.

The broadband provider Virgin Media Business and LGfL signed a 15-year contract worth up to £1bn two years ago. That deal was put out to tender but Virgin was the only applicant. The contract is subject to review every three years, but in a period of rapid change this does look like a very long-term commitment.

Atomwide, an educational ISP, also has a long-term deal with the council consortium. All three have united to market London Grid's service outside the capital under the name Trustnet. Again, this is promoted as a non-profit venture, but most of its activities are run by Atomwide, which appears to be a very profitable business indeed.

Its 2014 accounts show that three directors of a firm with just 41 staff earned a total of £819,000 between them, with the highest paid making £340,000. On top of that, the directors split a dividend of £900,000 three ways.

For a small firm which appears to be largely dependent on London Grid for its revenues that seems like a lot of money. I put a series of questions about the nature of the business to Atomwide. Apart from saying that 2014 had been an exceptional year and that no dividend would be paid in 2015, the firm directed all my questions back to LGfL.

I asked Brian Durrant whether he was happy that a business so closely intertwined with his organisation should be paying its directors so much. He said Atomwide was a private company and was not obliged to share details of remuneration that were not in the public domain. But he said LGfL "would have a strong preference to work with successful companies rather than failing ones".