By: MarkJ - 17 September, 2011 (6:15 AM)
yorkshire uk broadband internet mapdigital region ukThe Digital Region project, an alternative wholesale network operator that was setup with £100m of public sector funding (grants from the EU and taxpayer-funded loans) to help 97% of homes and businesses in South Yorkshire UK gain access to superfast broadband speeds of up to 25Mbps by the middle of 2012, could be sold off to the private sector.

Despite its ambitious aims the project, which is now well over 50% complete (network coverage), has persistently suffered due to a low take-up and growing competition from BT's own comparable 'up to' 40Mbps capable FTTC superfast broadband services (see this July 2011 news for more on the problems).

The wholesaler has also failed to attract major ISP customers (e.g. TalkTalk , Sky Broadband , O2 etc.) to its platform, which has left consumers with a limited choice of typically business focused providers (this is often blamed on disputes with BT Openreach). Poor marketing / advertising is also believed to have held the service back as many consumers were simply not aware that a choice existed.

The result of all this has been a lower than expected income, which is a big problem for a publicly owned firm that has to pay back millions of pounds in loans to local councils. Key to this is the fact that Yorkshire Forward, a Regional Development Agency (RDA) for the area and one of the projects backers, is due to be shut down by the government.

Phil Coppard, CEO of Barnsley Council and Digital Region supporter, said (Yorkshire Post):

"The thing that’s exercising us is what happens following the demise of Yorkshire Forward, and there are discussions ongoing about that.

The default position is that the RDA assets go back to the Department for Business – so they inherit it. The discussion is, what happens then?

If they bring a [private sector] partner in then that might not be a bad thing. But it’s too early to say what might happen."

One significant problem for South Yorkshire is that the Digital Region project is now the only solution on offer. The Broadband Delivery UK (BDUK) office recently allocated its remaining budget to councils around to country and £0 went to South Yorkshire (here). The move was unsurprising as South Yorkshire has already gobbled up significantly more public funding than most.

Meanwhile it's unclear who would actually want to buy the operator (we wouldn't be surprised if they over-valued it). BT has its own platform and most ISPs buy services from them as opposed to building their own infrastructure. On top of that the disputes with BTOpenreach haven't gone away. Meanwhile business ISP Fluidata has proposed an aggregated wholesale network (here) that could conceivably make the project more effective but it will probably come too late to prevent the sale.

UPDATE 24th September 2011

In related news Digital Region has now enabled its 1000th street cabinet with FTTC technology, which means that more than 75% of its cabinet upgrades (Phase 1) are now completed and the firm is well on the way to achieving its target (as above).
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