ISPs claim broadband funding going to wrong areas

 

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By Stewart Mitchell

Posted on 22 Oct 2012 at 10:58

Government funding for superfast broadband could be wasted on areas where fibre connections already exist, according to BT and Virgin - which are both lodging complaints against one project that would compete against them.

Birmingham City Council was given £10 million in funding from the government's £150m "superconnected cities" project to roll out fibre, but Virgin Media says it will include areas already covered by rival companies.

The two ISPs are asking the European Union, which has already given the required state-aid approval to Birmingham for the network, to reconsider its position, and more clearly define the areas that will be covered by the network.

"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," the company said in a statement.

We have proven that it is an imperfect market and have presented to the Commission a case that the majority of SMEs in... areas cannot receive affordable high speed broadband

According to sources at Virgin, the company is not against the funding per se, but said the project's boundaries were so poorly laid out that the EU couldn't be sure where the proposed network would overlap commercially available networks.

Neither company has spoken directly against the government funding for city projects, but are concerned that the money is being wasted on areas that already have connectivity - more specifically that compete with their own networks.

BT, which has already benefited from other publicly-funded projects - and is the only company so far to receive broadband funding under the main fibre roll out being handled by Broadband Delivery UK - said the Birmingham project would undermine investment from the commercial sector.

"BT believes the decision was substantially flawed," the company said in a statement. "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."

Birmingham's project involves laying cables to areas left without fibre connections by private firms that will only upgrade networks where they expect a profit, but was always likely to tread on the major networks' toes.

The situation is complicated by the patchwork nature of superfast broadband, with Virgin admitting, for example, that in some city areas, consumers on one side of a street might have fibre, while the other side goes without.

Quite how the companies propose to deal with infill in such areas remains to be seen, but consumers and Birmingham might feel that the action amounts to the ISPs protecting their own interests rather than upholding sensible spending values.

Disappointing delays

According to Birmingham officials, the project is necessary to address urban slow-spots.

"Birmingham is extremely disappointed in Virgin Media’s decision to appeal this landmark ruling," said councillor James McKay. "The city has worked in a very positive and collaborative way with the company 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."

According to Birmingham, neither Virgin nor BT are supplying fast broadband to enough areas of the city. "We developed a robust state aid case that clearly demonstrates a strong market failure," McKay said. "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."

The decision to launch the appeal highlights the difficulty of pushing funding into the market without angering existing providers, even if those providers have no intention of extending their networks to include all residents, which is what the publicly funded schemes aspire to.

The biggest disappointment, however, might be that funding that could be used for improving connections will be spent on lawyers' bills and bureaucracy, if the issue isn't decided quickly.