BT, Virgin Media Challenge Birmingham Super Connected Cities Funding

Steve McCaskill is editor of TechWeekEurope and ChannelBiz. He joined
as a reporter in 2011 and covers all areas of IT, with a particular interest in telecommunications, mobile and networking, along with sports technology.

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ISPs complain to the EC as government broadband strategy is dealt a blow

BT and Virgin Media have both asked the European Commission to revoke its decision to allow state funding to be used to create a superfast broadband network in Birmingham.

The ISPs believe that the funding will be used to create a government-backed rival to their networks in the Midlands City, which was named as one of the winners of the ‘super connected’ cities competition.

It was announced earlier this month that Birmingham would receive £10 million to provide superfast broadband to areas of the city where such speeds are not already available. However, Virgin Media has said this would be a waste of public money, while BT has called the decision “substantially flawed.”

Birmingham is the first ‘super connected’ city to attempt to create a network and the challenge represents a blow to the government initiative. Other such cities include Bradford, Bristol, Glasgow, Leeds, Liverpool, Newcastle, Nottingham, Manchester and Sheffield.

Super Connected Cities Row

Birmingham city centre © Shutterstock  David Hughes

“We fully support the Urban Broadband Fund and government ambitions to bring superfast broadband to areas not currently served by existing fibre networks,” a Virgin Media spokesperson told TechWeekEurope. “So it’s disappointing that Birmingham City Council has put forward a scheme which is not in the interests of local people and we believe, as a result, the European Commission has made a decision based on inaccurate and misleading information which could waste public money.”

“We can confirm we have made an application to annul the Commission’s decision. This is an unusual step for us to take but we believe the decision was substantially flawed,” said BT”. It would have discouraged commercial investment in high speed networks at precisely the time when such investment is required. It would also have set a dangerous precedent. We hope an alternative solution can be found as soon as possible so that companies such as BT can invest further in Britain’s cities.”

Council disappointment

Birmingham City Council said that it was disappointed with the development.

“Birmingham is extremely disappointed in Virgin Media’s decision to appeal this landmark ruling,” said Cllr James McKay. ““The city has worked in a very positive and collaborative way with them over the last few years to help inform and develop our business case and we are surprised that they have now chosen to appeal at such a late stage.

“We developed a robust State Aid case, based heavily on evidence that Virgin Media and others provided to us that clearly demonstrates a strong market failure. We have proven that it is an imperfect market and have presented to the Commission a case that the majority of SMEs in Digbeth, Eastside and The Jewellery Quarter areas cannot receive affordable high speed broadband.

“This decision has the potential to damage the creation of up to 1,000 new jobs, preventing up to £200 million per annum of GVA being pumped back into the economy. We are liaising with Government and the European Commission and we are advocating that this matter be treated with some urgency as a ‘test case’ for Europe and that everything that can be done to expedite it through the legal process is done.”

Government Strategy

BT’s opposition comes at a time when it stands to be the chief beneficiary from a separate government initiative to support broadband – the Broadband Delivery UK (BDUK) scheme. The money is intended to accelerate the rollout of superfast broadband in rural areas and BT has so far won all of the funding available. The EC is currently investigating to determine whether such funding represeants unwarranted government interverntion, although it has indicated it is ready to greenlight the project.

Both BDUK and the ‘super connected’ cities schemes are part of the government’s plans to have the best broadband in Europe by 2015. The rollout of 4G services are also a crucial component of this strategy, with the first 4G network set to be launched next week by EE, after peace talks between the major operators removed the threat of legal action further delaying them.

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