UPD Yorkshire Pumps £10m into Digital Region to Keep Broadband Project Alive

The financially troubled Digital Region project, an alternative wholesale network operator that was built with £100m of public money to help 80% of homes and businesses in South Yorkshire (UK) gain access to superfast broadband services, is to get yet another injection of £10m from the public pursue in order to stay afloat.

The service, which in January 2012 revealed that it had lost over £9.2m in 2011 and only created revenue of just £167,000 (here), has been in trouble due to low take-up for awhile now. So far none of the big UK ISP have shown much interest, which is partly because of growing competition from similar BT services and a lack of effective advertising. As a result the future of Digital Region remains deeply uncertain.

According to the Yorkshire Post today, Doncaster, Rotherham and Barnsley Councils each own around 9% of the shares in Digital Region, while Sheffield Council owns over 17% and the remainder is owned by the governments Department for Business, Innovation and Skills (BIS) which acquired Yorkshire Forward’s shareholding.

As it stands now the current business model has failed and few expect the related local councils to carry it forward. Instead the “least-worst scenario” is that Digital Region will be kept alive for a little bit longer while a private company / ISP is found (tender) to operate the project, albeit with public funding as support. The alternative, of allowing Digital Region to fail, would allegedly be even more expensive and cause serious problems for its remaining customers.

The latest development has been expected since January when Yorkshire Forward’s then CEO, Thea Stein, confirmed that more funding would be needed and this would probably only serve to keep the lights on until the end of 2012. “We are committed to seeing Digital Region flourish, but like all start-up businesses it needs support. It’s important to state this is a guarantee – the hope is they will not need to draw it down,” said Stein.

UPDATE 4:21pm

Digital Regions Chief Operating Officer has sent over a statement.

David Cowell, Chief Operating Officer of Digital Region Ltd., said:

“The project is pioneering and it has helped place South Yorkshire at the forefront of the UK’s digital agenda.

Thanks to our current delivery partner Thales, the build phase has been successfully completed to time and cost and whilst the majority of the UK must wait until 2015 to experience superfast broadband, a phenomenal 80% of SY businesses and residents can already connect. DRL is delighted to move forward with the continued support of both the board and the central government and Local Authority shareholders.”

Cowell added that Digital Region will move in line with the commercial model being promoted by central government’s Broadband Delivery UK (BDUK) for superfast broadband in the rest of the UK. The BDUK commercial model, says Cowell, places the majority of risk and liability to a private sector partner. The appointed supplier will take responsibility for all operating costs, sales, marketing and revenue generation.

Andrew Bedford, Strategic Director of Resources at Rotherham MBC, added:

“The new business model aims to ensure that superfast broadband is available to as many people and businesses as possible, whilst also helping to reduce the council’s current commitments and future risk. The new plan will help make South Yorkshire competitive with other areas and encourage economic development and growth.”

Cowell described it as a “significant and exciting development” that Digital Region will now work to procure a private sector partner to take over the operations of the broadband network and will make further announcements regarding the tender application in May 2012. “[This] is without doubt the best way forward for Digital Region to ensure the significant benefits of the project are delivered and the people of South Yorkshire can continue to benefit,” added Cowell. Well that’s one way to dress up an extremely dire situation.