Rural broadband project costing councils millions and faces closure

The South Yorkshire Digital Region is seeking approval from EU to lower broadband targets

A troubled rural broadband project in South Yorkshire is set to cost councils millions of pounds in bailouts and faces permanent closure if the European Union doesn't agree to allow targets for the network's reach to be lowered.

According to reports, the South Yorkshire Digital Region, which is one of the few areas not participating in the government's national Broadband Delivery UK (BDUK) programme and hoped to become "the best broadband network in Europe", is like to be "closed down" if EU officials don't agree to the scheme being drastically scaled back.

Sheffield, Rotherham, Doncaster and Barnsley currently own the superfast network in partnership with the government, but are planning to sell it to the private sector after failing to attract enough customers to use the service since its launch in 2010.

A French company, Bouygue Energy and Service (BEYS), is currently the preferred bidder to take on the project. It would take on all future liabilities and assume full ownership of the network in 2019.

However, a new report by Doncaster Council's finance officers states that the process is expected to cost a minimum of £15 million - with Doncaster, Barnsley and Rotherham each paying out £1.3 million, and Sheffield £2.6 million. The remaining sum will be covered by the Treasury.

This cost adds to the £30 million the four councils were forced to pay out last year to prevent the scheme from falling apart due to increasing losses. Some £10 million in loans were also written off at this time.

Due to the losses, the scheme has had to stop work at 80 percent coverage of the region - far short of the original 97 percent that was planned and without many of the true rural areas catered for. Brussels, which provided a £25 million grant towards the cost of installing the network, has to now decide whether it is acceptable for the project to be scaled back.

The EU may also ask for its money back, which could cause the deal with BYES to fall through.

Mayor of Doncaster, Peter Davies, has hit out at the project labelling it "appalling" and "idiotic".

He said: "It's a disaster for Doncaster and South Yorkshire. It is a scheme which nobody in their right mind would have entered into. The council leaders involved thought they were businessmen, but the way the project has gone proves they wouldn't know how to run a whelk stall.

"So far in Doncaster it is £10 million down the pan, when we need every penny we can get."

He added: "Since I was elected in 2009, the project has been like having a nail in your shoe. It is appalling, and I cannot understand why my predecessors entered into this idiotic arrangement."

Most councils are participating in the BDUK scheme, which saw the government provide £530 million of state funding to get superfast broadband into rural areas. However, BDUK came under fresh criticism today after Fujitsu pulled out of the process, leaving incumbent BT as the last remaining supplier.

BT has won all public money awarded so far and now has an open field to win the remaining project and snap up the last of the public funds.

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