The debt infested Digital Region network, which was originally setup with around £100m of public money to help deliver better broadband services to South Yorkshire (England, UK) because BT had little interest in doing so, could need up to another £45 million to survive and has so far only got 3,000 customers!
The shocking reality of DRL’s plight was revealed by the government’s Minister of State for the Department of Business, Innovation and Skills (BIS), Michael Fallon, during a recent Legislation Committee debate in which the prospect of providing more funding to keep the network afloat was discussed.
At present DRL claims to have made superfast broadband (FTTC/VDSL) services available to 80% of premises in South Yorkshire but it’s struggled to compete with the established might of BT and has in the past suffered due to poor advertising and a limited choice of ISPs (sadly Fluidata’s service exchange platform doesn’t appear to have made much of a difference).
In February 2013 it was revealed that French firm Bouygues Energies and Services (BYES, formerly ETDE SA) had finally been picked as the “preferred bidder” to take over the running of DRL’s business (here) but since then there’s been little progress.
Michael Fallon said:
“This project, which was set up in 2006, had started to go very badly wrong by 2009. That had nothing to do with any broadband policy decisions taken by this Government. I remind the hon. Gentleman that the project cost £100 million to build. By about this point—seven years later—it was intended to have attracted 20% of households in south Yorkshire, which would equate to 108,000 customers. It actually has 3,000 customers.
He and his colleagues can do the maths. Perhaps they ought to ask themselves who authorised the £100 million spend for only 3,000 customers. I am sure hon. Members can do the division calculation. The hon. Gentleman himself has noted that in order to continue with this project, we are spending more than £10 million each year to service those 3,000 customers. I am sure he can do the maths.”
In all Fallon asked the Committee to consider a motion that would authorise the Secretary of State to pay between £10m and up to £45m in “financial assistance” to help Digital Region stay afloat and support the new owner (assuming they ever sign a contract). Naturally some members were quick to question the “excessive sum” and queried whether this would be the last injection of public money.
Michael Fallon added:
“[You] wanted to know why we are having to spend £45 million clearing up this mess. The answer is simple.
We now have to assume all the liabilities of Yorkshire Forward, the regional development agency that signed up to this nonsense. As it was 50% of the cost, we will have to provide at least 45% of the funding, including a significant proportion of the repayment of the European regional development fund grant of £27 million, which rightly has to be paid back to Brussels, because the original conditions were not fulfilled.
We have to pay, as a 50% shareholder, our proportion of the contract due to the original operator, which has now been suspended, even though the terms agreed by Yorkshire Forward and the four councils with that original operator were hopelessly inadequate, in that they did not transfer any income risk whatever to the operator.”
The threat of DRL having to be closed down remains very real, although with a preferred bidder waiting in the wings and the threat from closure being both a technical, political and economic nightmare, it would be very surprising if at least some of the requested funding was not released.
Indeed BYES are unlikely to sign any contract to take over the running of DRL’s network unless the government can tackle some of its biggest concerns, such as by covering the EU’s grant of £27 million via the public purse. Never the less with just 3,000 customers on the books it does beg the question, why even bother anymore? Credits to Thinkbroadband for spotting this.