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Regional Broadband Scheme Faces Investigation

Tom Jowitt is a leading British tech freelance and long standing contributor to TechWeek Europe

Taxpayers’ money could be needed to prop up regional broadband infrastructure scheme, as local councils begin an investigation

An investigation has begun into a regional fibre broadband infrastructure scheme in South Yorkshire after it recorded a heavy loss within its first year of operation. The Digital Region project was launched in 2010, and aims to provide South Yorkshire with superfast broadband coverage.

Over the past couple of years, the project has built a 350 mile fibre optic network across the entire South Yorkshire region, serving 1.3 million people, 546,000 homes and 40,000 businesses in and around Barnsley, Doncaster, Rotherham and Sheffield.

White Elephant?

It is worth noting that this fibre network is independent of BT’s national network and that of Virgin Media, and aims to offer wholesale fibre-based services to Internet Service Providers. But reports suggest that the project has turned into something of a white elephant after it attracted little interest from ISPs and the scheme has reportedly made an estimated loss of £9 million in the last year.

The £92m scheme was funded by a combination of local councils in the area (Sheffield City Council, Barnsley Council, Rotherham Council and Doncaster Council), as well as other agencies. These included the European Regional Development Fund, the regional development agency, and Yorkshire Forward.

According to the BBC, Rotherham Council, which is acting on behalf of the other authorities, as to why the project has raised so little interest. In September a scrutiny panel on Barnsley Council reportedly raised concerns over the project, saying the roll-out of the fibre network had taken longer than expected.

Barnsley Council leader Steve Houghton was quoted by the BBC as saying that the project had not “been as effective as we hoped”. He then added that an investigation was now being carried out to “see what the pressures and issues are and to see if we can make sure we deliver the outcomes we are looking for”.

A report is apparently expected in six to eight weeks, although for the time being the four councils continue to support the project.

Financial Losses

On Tuesday however The Yorkshire Post revealed that it had seen the accounts for the Digital Region project, which showed that it had lost more than £9 million last year in operating costs, prompting fears that extra taxpayers’ money may be required to prop up the project.

The Post newspaper said the project appears close to collapse because it has failed to attract ISPs to resell its superfast broadband product.

Admittedly it seems that the installation of the fibre network (the most expensive part) is now mostly complete, but the Post said that accounts filed with Companies House this week reveal the publicly-owned company has brought in just £167,000 so far.

“Year-end losses for 2010-11 totalled £9.2 million, and the accounts state for the second year running that a ‘material uncertainty’ exists over Digital Region’s ability to continue as a going concern,” wrote the Post.

And it seems that the regional development agency (Yorkshire Forward), which is underwritten by the Government, has been forced to pledge a further £4 million of public funds to the Digital Region project.

“The decision was made with the local authorities that Digital Region might need more money,” Yorkshire Forward chief executive Thea Stein was quoted as saying. “Clearly the discussion has been had with central Government, as all Yorkshire Forward’s funding ultimately comes through them. We are committed to seeing Digital Region flourish, but like all start-up businesses it needs support.”

Rural Broadband

The difficulties with this regional broadband project will serve as a timely reminder to local councils, who have to find their own funding to supplement the £530m BDUK funding from central government to push fibre into rural areas.

Regions across the UK have already been allocated their broadband funding from central government, but just before Christmas, English councils were warned they have until February to submit their proposals to receive this rural broadband funding. This comes after the Countryside Alliance criticised the lack of progress in rolling out superfast broadband in rural areas.