Virgin Media Seek to Avoid Legal Clash Over UK City Broadband Funding

Cable operator Virgin Media has written to the UK government’s culture secretary, Maria Miller, with a series of recommendations for changing the £150m+ Urban Broadband Fund. The UBF aims to support the roll-out of “ultrafast” broadband services and fast public wifi, although Virgin and BT have already threatened it with legal action.

Critics of the government’s “super-connected cities” (UBF) strategy have often questioned why public funding is needed in cities, where the case for private sector investment should be easier to make (i.e. more potential customers). Never the less many urban areas do suffer from slow broadband services (i.e. Lack of Fast Broadband is NOT Just a Problem for UK Rural Areas).

So far 10 major cities in the United Kingdom have already had their funding allocated and Europe has even cleared several of the related projects, not least the Smart City plan for Birmingham. A further 10 smaller cities are due to be confirmed on Wednesday, as part of the government’s Autumn Statement.

But BT and Virgin Media have since launched a warning shot across the government’s bow by announcing plans to lodge a legal challenge against Birmingham’s Smart City scheme, which claimed that the newly proposed network would overlap with theirs and thus risk damaging the market.

A VirginMedia Spokesperson said today (CITY A.M.):

“The funding of super connected cities needs a major overhaul if the government is to help drive small business growth and unlock the promised revenue and productivity benefits. Public funds should be focused on where they’re needed most, investing in skills, access and training to drive usage and enable small businesses to take full advantage of existing next generation networks.”

According to today’s report, Virgin Media has already met with Maria Miller for “productive” talks over the issue and indeed we’d be surprised if some of its recommendations weren’t already happening. For example, Virgin is alleged to have requested that city councils “prove that there is un-met demand for superfast networks” (something other local authorities have already been surveying as part of the related Broadband Delivery UK funding).

Elsewhere Virgin suggested that some of the money should be used to educate businesses about how to improve their broadband speeds, instead of building new networks. In both cases the recommendations point to BT and Virgin Media’s desire to keep public money away from rivals, which could build networks in areas that can already be served with superfast services.

The problem here is that any new urban network would at some point potentially need to cross an already well served area and thus the issue can easily become quite complicated. At the same time it remains unclear whether or not BT shares in Virgin’s recommendations, which would be necessary to properly diffuse the current concerns.

Whatever the outcome we probably won’t see any changes to the UBF structure until early 2013 as it’s now a bit too late to make such changes in the forthcoming Autumn Statement.