Failed superfast network gets propped up by the taxpayer

As reported in the Telegraph and the South Yorkshire Times today  the failed South Yorkshire Digital Regional scheme is to be offloaded to the private sector at a cost of £1.3 million to the taxpayer. Doncaster Council took the decision yesterday to transfer ownership of the failed network from four local governments - Doncaster, Rotherham, Sheffield and Barnsley – to the private sector company Bouygue Energy and Services based in France because it is cheaper than shutting down the network completely.

The South Yorkshire Digital Regional scheme was launched in 2009 with the aim of serving 97% of the geographical area with superfast broadband. At a cost of over £100 million made up of taxpayer funded money primarily coming from the European Regional Development Fund along with local and national money, the project has failed to achieve the projected 97% target and has failed to gain significant customer sign-ups.

In a report from Doncaster Council made available ahead of the meeting yesterday the council saw no other way to proceed than to go ahead with re-procurement. It said that scrapping the project would result in having to pay back the EU the money that it already spent on the scheme. Additionally, it would have to renegotiate the terms of the original scheme to account for rolling out superfast broadband to only 80% of the region. The report highlights the following goals for the re-procurement:

· Maintain the original vision for the Digital Region project

· Find new capabilities and expertise from a new operator

· Transfer the risk of operating the network to the private sector

· Cap shareholder liabilities

· Have a new contract in a form that avoid clawback of the European grant used to build the network

· Remain State Aid compliant

· Be cheaper than the alternative – which is closure

What would have been a better alternative? Eighty miles south company called Rutland Telecom  provides non-BT (or non-UK telecommunications incumbent) fibre to the home and fibre to the cabinet broadband. And here is the catch – they need to signup at least 30% of a community in order to build out a network. This means that new networks are built out only if there is a demand for it. Any other business would do the same in the private sector.

In a recent OFCOM report one statistic stood out among all the others with respect to superfast broadband. Of the 67% of the UK that has access to superfast broadband only 7% chooses to take it up. The South Yorkshire Digital Regional scheme would have save a lot of taxpayers’ money if they had obtained pre-enrollment prior to building out the network. Other taxpayer funded superfast network projects should take note and use the South Yorkshire Digital Regional scheme failure as a warning.

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