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UPD4 Crippling Debt Forces South Yorkshire UK Digital Region Network to Shut

Thursday, August 15th, 2013 (2:43 pm) - Score 3,250

As feared the £100m+ Digital Region broadband network, which acted as an alternative to BT and delivered superfast broadband services to 80% of premises in South Yorkshire (England), has finally fallen under a growing weight of debt and announced its closure.

The news follows hot on the heels of a crucial debate last month, which reported that the network would have required up to another £45 million just to survive and yet it only had a customer base of 3,000 subscribers (i.e. it needed over 100,000) across several ISPs (here).

As a result Digital Region and its backers, which include major shareholders alongside Barnsley, Doncaster, Rotherham and Sheffield councils, have agreed that the only solution is a “managed closedown of the network“. Existing customers can expect to be “migrated to alternative networks“, which is now viewed as the “most cost-effective deal for the public“.

Digital Region Statement

The estimated cost of continuing with the project would be an estimated £95.8 million. Closure of the network would save the taxpayer an estimated £12.5 million, and potentially more, subject to negotiations with existing contractors and customers.

Shareholders have been firmly focussed on using Digital Region Limited (DRL) to achieve a significant increase in superfast broadband coverage across South Yorkshire to ensure economic competitiveness did not fall below other parts of the country. This has now largely been achieved by investment by other providers and shareholders had embarked on a re-procurement exercise in March 2012 to facilitate the commercial transfer of the network to another provider.

Until this point, the costs of closure and the costs of continuing with the project and realising additional benefits for residents and businesses of South Yorkshire were finely balanced.

Digital Region was established as a pioneering project to deliver major transformational change in the way superfast broadband was delivered across South Yorkshire. When the project was conceived, next generation broadband was not yet available in South Yorkshire, compounding the area’s existing economic disadvantages. A visionary solution was needed to a complex and pressing need.

However, there have been significant developments in the broadband market and it is no longer financially viable to keep the project up and running. The focus will now be on obtaining the best possible deal for taxpayers and ensuring a smooth transition for existing DRL customers to another provider so that services are not disrupted.

The statement concludes by saying that existing customers “will be supported over the coming months” as they attempt to find alternative ISPs, although so far no specific date for when the network will close has been announced but the process is expected to take a year.

It had been hoped that the decision earlier this year to announce French firm Bouygues Energies and Services (formerly ETDE SA) as the “preferred bidder”, which would take over the management of DRL (here), might just be enough to save it but they weren’t prepared to sign a contract unless the crippling debt could be resolved.

Digital Region was a nice idea but also an example of why politicians should never try to setup their own telecoms operator in competition with the commercial market. The service was poorly advertised and, by the time it achieved any real coverage, BT had caught up and was able to offer local consumers a much wider and cheaper selection of ISPs.

UPDATE 5:05pm

In a brief statement BTOpenreach has told ISPreview.co.uk, “This is disappointing news for the people of South Yorkshire and shows yet again how complex and challenging it is to deploy fibre broadband.”

Meanwhile North Yorkshire, which was one of the first state aid supported Broadband Delivery UK (BDUK) contracts, is currently expecting to make BT’s superfast FTTC/P network available to 90% of the region by the end of 2014. It’s unclear what will happen to South Yorkshire, which due to DRL will not benefit from BDUK funding.

UPDATE 16th August – 6:58am

A couple of statements from DRL ISPs including Chess Telecom (Little Big One) and Origin Broadband, plus the government, have been put out over night.

Chess Telecom Statement:

You may have heard the announcement today on the closure of the Digital Region Network. Please be assured that your service with Chess will remain unaffected.

We will continue to keep you up to date with any developments but rest assured you are in a great position with Chess – We have relationships with all major UK networks and as such can provide an unparalleled product range alongside great service – all backed by our Never Beaten on Price Guarantee.

If you have any immediate questions please do not hesitate to contact our Customer Service Team on 0844 770 6060.

Oliver Bryssau, MD of Origin Broadband, said:

At Origin Broadband we have faced many challenges but through each one we have gained new skills, new people and greater purpose. While we are sad to see Digital Region close we see this as an opportunity now to take our services to the next level.

We are the largest provider on the Digital Region boasting over 70% of connections on the network despite being a newcomer to the market, we’ve grown to become a large player in the local market providing services to the NHS, Doncaster Racecourse and we will continue to keep moving forward. We’ve made great links and developments which help us expand offering new products, new services (like our new data centre) and new features to enhance your experience with us.

We already have plans in place to continue to provide our customers with service and even enhance your experience with us whilst continuing to provide new customers with superfast fibre broadband.

These are exciting times and with Origin, when one door shuts several more always open and we strive to move forward and show just how valuable investing in a local project and a local company can really be!

A Spokesman for the Government’s Department of Business said:

A combination of market changes and the commercial model meant that it was no longer financially viable to support the project purely with public sector funding. Attempts were made to find a private partner, but everyone involved has decided that a managed closure of the network now represents the best deal for taxpayers.”

UPDATE 16th August – 11:48am

The Chief Operating Officer of Sheffield-based UK ISP ASK4, Ross Bray, has sent us the following statement.

Ask4 Statement on DRL Closure:

Yesterday Ask4 were informed that the shareholders of Digital Region Limited had taken the decision to close the network via a managed closure approach.

At present there has been no more information provided to ISPs connected to DRL about how this closure will be conducted. All ISPs have been invited to meet with DRL personnel later in the month in order to discuss concerns about the closure.

For the foreseeable future the network will continue to operate as normal and there will be no disruption to service.

ASK4 is investigating all options to continue to provide service to its Digital Region customers, or to assist those customers in finding an alternative supply. ASK4 will be in touch with all customers over the coming weeks as more information is made available to help explain all options that are available to them.”

UPDATE 19th August 2013

The leader of Barnsley Council, Sir Steve Houghton, has called for an independent review to look at “what happened and why, and to find out what lessons can be learned“. A good idea, albeit ironically one that will also suck up more public money.

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By Mark Jackson
Mark is a professional technology writer, IT consultant and computer engineer from Dorset (England), he also founded ISPreview in 1999 and enjoys analysing the latest telecoms and broadband developments. Find me on Twitter, , Facebook and Linkedin.
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