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Broadband Project Collapses Due To Lack Of Customers

Government refuses to spend any more on South Yorkshire Digital Region plan, which has attracted only 3% of the customers needed.

A troubled scheme to deliver broadband access to a sparsely-populated area in Northern England has lost the support of the government, throwing doubt on the project's whole future.

The eight-year old, £100 million ($153 million) South Yorkshire Digital Region plan is meant to deliver high-speed connectivity to 1.3 million consumers, 546,000 homes and 40,000 businesses in and around Barnsley, Doncaster, Rotherham and Sheffield. Most rural areas in South Yorkshire are still unable to get high-speed Internet.

Business Minister Michael Fallon said the government will stop supporting the scheme, forcing the four local government bodies involved to either come up with the cash themselves or close the whole initiative. The government says it will have to write off £45 million ($69 million) as a result of pulling out, according to local press reports in the county. At least £27 million ($41 million) of that is made up of money that has to be returned to the European Union, which gave money to help start South Yorkshire Digital Region.

[ Are U.S. companies skirting British taxes? Read Twitter's Tiny U.K. Profits Raise Eyebrows. ]

The project has attracted criticism since its 2009 launch, owing to what seemed to be endless financial issues and a lack of user interest -- with a mere 2.7% of the 108,000 initial customers required to make it viable signing up for the service. That means, said Fallon, that the project is effectively costing British taxpayers £33,000 ($51,000) per user while hemorrhaging £1 million ($1.53 million) a month.

Fallon was also highly critical about the "hopelessly inadequate" contract signed with the project's main tech partner, France's Thales, which he said was "very poor and extremely badly negotiated".

"We have to clear up the mess," said Fallon, before adding he was "determined" to limit the exposure of the government to any further cost.

The news has been greeted as a warning to similar attempts to spark interest in next-generation broadband in the country by pressure group The Taxpayers Alliance, which campaigns against what it sees as public sector waste. In a blog post Friday the group protested, "What has been so extraordinary about the entire project is the lack of oversight in determining who would sign up to the broadband offered … It seems that the South Yorkshire Digital Scheme lacked the oversight or understanding of the customer market that was needed to keep the costs in check."

Lack of a marketing budget and the launch of the Infiniti fiber-based broadband system from dominant British telco BT "did not help the situation," the blog adds, before claiming "the reality is that limited market competition and consumer choice played a big part in its failure.

"Demand for broadband of any kind by customers should drive infrastructure development," it adds. "The government does not need to be involved."

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