Government Super-Connected Cities Vision Reduced To Voucher Handout

The government’s much vaunted ‘super connected cities’ plan, championed by the Chancellor George Osborne, has been effectively neutered following legal objections from BT and Virgin Media.

In late 2011 and early 2012, the government had set aside a total of £150m in funding in order to create 22 so called “super-connected cities” in the UK, by using public money to build fibre-based networks.

These cities were London, Edinburgh, Cardiff, Belfast, Birmingham, Bradford, Brighton, Hove, Cambridge, Coventry, Derby, Leeds, Oxford, Portsmouth, Salford, York, Newcastle, Manchester, Newport, Aberdeen, Perth and Londonderry.

Legal Objections

In September 2012 the government informed each city exactly how much money they would receive in order to build their own superfast broadband networks. Birmingham was the first ‘super connected’ city to attempt to create its own network, but the plans were scuppered after legal objections were logged by both BT and Virgin Media, last October.

TechWeekEurope understands that the objections came about because Birmingham City Council was planning to build its own superfast broadband network in areas that were already served by the fibre networks of BT and Virgin Media. The ISPs were concerned that public funding was going to be used to build a government network to rival their own existing networks.

But the government’s super connected city plan was also causing concerns because it could potentially breach European anti-competition rules. This was evidenced by the decision earlier this month of Edinburgh City Council to halt the construction of its own fibre broadband network and replace it with Wi-Fi hotspots and vouchers for businesses.

And now following the Spending Review this week by Chancellor of the Exchequer George Osborne, the government has backed down and instead a new consultation document suggests a much more watered down approach. This is because instead of using the money to build fibre networks, the main focus of the plan is to now offer £90 million of vouchers to subsidise the cost of businesses installing 30+Mbps broadband connections. Only businesses with fewer than 250 employees and turnover of no more than £42m can apply for the vouchers.

ISP Reaction

The government’s wireless side of the plan remains unchanged. However the change towards vouchers instead of network construction represents something of a victory for both BT and Virgin Media.

“Where companies are already investing in world class connections, government has recognised public money should not be used to build more networks,” a Virgin Media spokesperson told TechWeekEurope. “Investing where it’s needed most, in digital skills, access and training, will drive use of next generation services amongst businesses and tap into an £18 billion growth opportunity for the UK economy.”

BT also welcomed the decision.

“The government’s voucher scheme option for super-connected cities is being pursued as a practical means of contributing state funds to the deployment of fibre infrastructure in unserved parts of the participating cities,” BT told TechWeekEurope in an emailed statement.

“BT is working with DCMS/BDUK and the rest of the UK industry to deliver a workable voucher based scheme to bring high speed broadband services to SMEs and others in the participating cities using the £150m allocated by government,” it said. “BT would also be keen to participate in wider infrastructure build schemes in cities where a suitable state aid approval for such a scheme in UK cities is available, but this is currently not the case.”

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