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£100 million spent on broadband network to serve just 3,000 customers
Friday 26 July 2013 11:11:10 by Andrew Ferguson

It appears that the nine year story behind Digital Region in South Yorkshire may be reaching its concluding chapters, with either the network being acquired by French operator Bouygues Energies and Services (BYES) or closed down, with customers migrated to alternative operators.

A House of Commons committee meeting back on the 15th July 2013 met to discuss authorisation of between £10m and £45m to sever any further risk for the Government in the project. The network was started some years ago in 2006 with construction getting underway in 2009 and a construction cost of £100m has been cited and on going costs for keeping Digital Region Ltd running are £900,000 per month.

The network has some 80% of premises in South Yorkshire in its footprint for the VDSL2 services it offers, but the real kicker is that while the original target was a 20% take-up figure of around 100,000 customers the network is serving just 3,000 customers, i.e. costing £300 per month to supply each customer and it has cost £33,000 in network build costs to serve each of these customers.

Looking at these figures you can see why Michael Fallon MP The Minister of State, Department for Business, Innovation and Skills is looking to draw a line under this affair which has been inherited from the previous Government.

"DRL’s purpose was to provide high-speed broadband in a disadvantaged area to support growth and job creation. However laudable the motive, the project was deeply flawed. A combination of delays in appointing a contractor to build and run the network, failing to adjust as necessary in a fast-moving business sector and insufficient—in fact, zero—income risk being allocated to the network operator made the business hopelessly uncompetitive. I could go into how Yorkshire Forward should have been more agile and responsive as business conditions changed radically in the south Yorkshire broadband market while the DRL network was being commissioned, but doing so would sadly serve no purpose now.

My Department inherited a difficult situation from Yorkshire Forward, because we were faced with a technically advanced broadband network that was financially unsustainable. Contractual arrangements allocated all financial risk to the shareholders, providing no incentive at all for the operator to compete with the market leaders that entered the south Yorkshire broadband market. Simply to close the network was expensive, because severance costs had to be paid to existing contractors and the European regional development fund grant of £27 million that part-funded the construction had to be repaid.

A new operator for the network could still bring the economic benefits that were originally anticipated to an area that suffers significant disadvantages, thus preserving some value from the almost £100 million that has been invested."

Michael Fallon MP on Digital Region

In the original BDUK funding allocation back in 2011 there was still a hope that Digital Region would meet the coverage targets the Government was chasing then of 90% with access to superfast and everyone else getting 2 Mbps or faster. The question now is given that it seems almost impossible that Digital Region will expand, and very likely it may close, what contingencies are in place to ensure South Yorkshire does not fall behind the rest of the UK.

A major problem for Digital Region was the delay in roll-out, as by the time services started to become available it was competing with Openreach rolling out its own FTTC network, and Virgin Media upgrading the speeds of its service. This publically funded network also appears to have also rolled out in the areas where it would be fairly clear to most that commercial operators would eventually deliver.


Posted by ukhardy071 over 4 years ago
My old house in South Yorkshire was affected by this.

For about 15 years we had cable services via virginmedia. Around 75% of people where I lived had virginmedia. The rest had Sky, with a couple on o2 or BT. Most people already had access to 30Mbps connections via virginmedia at competitive prices.

ADSL speeds were all around 16Mbps as well, we were less than a mile from the BT exchange.

Then BDUK came along and installed its services.
Posted by ukhardy071 over 4 years ago
Before BDUK came along we had a FTTC date set & were going to be one of the first areas to get FTTC. Due to BDUK arriving the plans for FTTC were removed and never came back.

The area was heavily concentrated with people, it was clearly going to get FTTC services, already had virginmedia and at the time I was left thinking why the hell are they wasting money in the area?
Posted by ukhardy071 over 4 years ago

a) Nobody in the area wants a service from digital region. If it was run by BT people would take it. Everybody in the area was happy with their connections with the big ISPs. Even those not on fibre optic still had a good 16Mbps.

b) When it was rolled out absolutely nobody knew about it. I think I was the only person. We didn't get any information to let us know that the digital region had arrived in our area.

c) The green cabinets which BDUK had seemed sparsely located especially compared to where the BT ones were.

Overall a complete waste of money.
Posted by ukhardy071 over 4 years ago
The mistake BDUK made was to come to areas where customers were already really happy with their connections. Nobody had slow broadband where I was, absolutely no one.
Posted by shaunhw over 4 years ago
Here at my office in Rotherham it's the only VDSL connection we can get. :-( Also need multi I/Ps which Origin will do. It's a shame, but if they've really spend so much, and are about to tip up another 45 million on top couldn't they use that money to get those 3000 customers connected to fibre to the premises ? ;-)
I'm a bit peeved if I've dumped BE for this because of the Sky takeover.
Posted by shaunhw over 4 years ago
PS: Nobody really did know about this. I have no idea why, and don't know why the major ISPs didn't get on board. It can only be unprofitable terms and conditions. I am sure they'd have looked into it all. It really is a shame because DR is actually very good right now.
Posted by tikka69 over 4 years ago
It was doomed from the start. Rolled out to all the areas where either Virgin had a footprint or BT would obviously put there cabs. Its now ended up with circa 20 exchanges not being done, and these are the very ones that BT hasnt bothered with ( which would have made DR the only option !! )

Epic fail and EPIC waste of money. Would have been far better if BT had been awarded this years ago, they would have done a much better job and would have covered the entire area, instead of just the 80% that DR have struggled with.............
Posted by herdwick over 4 years ago
@ukhardy071 did you mix up your SYDR and BDUK ??

An illustration of public sector "excellence". It was even locally driven and partly funded by councils, who are alleged to understand their area.
Posted by shaunhw over 4 years ago
Not sure about the above figures - Where does £13,000 come from ?

Posted by Dixinormous over 4 years ago
SYDR should stand up as an example of how not to do it from the commercial point of view.
Posted by mhc over 4 years ago

Where does the £25 per customer come from?

If it is costing £900,000 per month to run it and 3000 customer, that is £300/month (less what each customer pays).

Posted by andrew (Favicon staff member) over 4 years ago
Not sure what happened to my brain, but yes figures were too generous.

Install per connected customer £33,333 and £300/month.
Posted by shaunhw over 4 years ago
Ah now those are the figures I had but didn't like to say anything in case I'd missed something. Crikey! Everyone could have had a fibre cable for that!

Really annoying because I would have had it put in at my house in Wickersley and we can't get it! I am with a DR supplier but via ADSL 2+ as we have an exchange only line.

I moved from BE because of Sky (office and home) and it looks like I might be moving again before long. :-(
Posted by Chips over 4 years ago
I have 4 SYDR lines. The service was a godsend to me,being able to move from a ropey 3.5Mbps to 40Mbps. It was the first VDSL service to be offered in the quiet backwater where I live, but strangely it was followed by BT FTTC about 3 months later. At the time it almost seemed like BT were deliberately following on the heels of SYDR. There was really no need to have both networks available on my street of 50 houses. The big downfall of SYDR, as has been mentioned above, was the complete lack of publicity. This was commercial suicide! Completely farcical!
Posted by ukhardy071 over 4 years ago
Yes I mixed up BDUK and SYDR!!

FTTC is coming in September to my old area now. So in the end BT came along again.
Posted by KarlAustin over 4 years ago
I've been carping on about SYDR for quite a few years (see my open letter to Digital Region), unfortunately it was brushed aside - but by then it was too late anyway, they didn't understand who their customers were going to be and what they needed i.e. an automation API from the very start. It's such a shame, as it could have been great, Origin are an excellent SYDR ISP. Like many city centres there's no VDSL from Openreach planned in Sheffield so SYDR is the only answer :(
Posted by otester over 4 years ago
Like with all government programs...inefficiency is rife!
Posted by herdwick over 4 years ago
Out of interest what would it have cost per connection and per month to run this if it had achieved target customer numbers ?
Posted by Gadget over 4 years ago
The sad thing is that the project was started in 2006 and the phrase "First mover advantage" keeps coming to mind. One of the key considerations for any discounted cashflow analysis is getting revenue in early, it looks to me like there possibly isn't even enough coming in 7 years later to pay for the day-to-day running, let alone payback the capex.
Posted by herdwick over 4 years ago
Had it achieved 100,000 connections they would have cost £1,000 each to connect – compared to the BDUK/BT intervention at one tenth of that level.

Ongoing costs of £900,000 per month are also high at £9 per month had it achieved 100,000 connections, given that Talk Talk are bitching about margin issues when charging £10/month extra for fibre.

We should learn from this that “Open Access” is fatally flawed, unless accompanied by contracted retail ISPs from the known universe that will be able to attract or switch-over customers to any new platform.
Posted by PeterProxy over 4 years ago
I'm one of the 3000, I thank you for paying your taxes etc.
Posted by haydnwalker over 4 years ago
I'm also one of the 3000, and I highly rate the service I receive from Ask4. I really hope they don't close it down or even worse...migrate me onto some large ISP as I'm rather used to the personal service I'm receiving currently!

Apologies to those that think the network is worthless...I agree it wasn't properly publicised, and the fact they couldn't get any large ISPs on board, but really...BT weren't going to get on board were they if all they did was follow Thales around plonking VDSL2 cabinets up 10-20m away from the DRL ones!
Posted by LeJimster over 4 years ago
Apparently the 3,000 figure is too low according to one of the ISP's on DR... They also they have a guarantee on the service, so it's not going to be shut down, if anything it will be privatized as it should have been done as soon as the network was built.
Posted by mdar5 over 4 years ago
I'm not suprised you think the service is excellent - considering how much of my taxes is going to to subsidise it!

Is that "guarantee" the same as a bank of cyprus "guarantee"?
I'm sure it will be privatised and all the losses to date will be written off and absorbed by taxpayers - ie me.

Anyway this news item is conspicously absent of all those posters who endlessly moan about BT on here and how it would be so much better if it was all nationalised and run by the government.
Posted by cyberdoyle over 4 years ago
It was doomed to fail, they targeted the wrong areas. They tried to compete instead of building new. They didn't put the money into assets, they put it into competing in the areas where there already was a service instead of giving a superior service to those who had nothing. What a waste doing fttc when they could have done fibre.
Posted by rayvon over 4 years ago
I for one was happy that DR came along,prior to that I was lucky to get 2mb with O2,and before O2 it was around 1.5mb with BT.
There is still no sign of BT enabling my exchange and one or two more adjacent to mine for FTTC.
DR and the few isps who are under its wing did little to advertise and push their product,that is why not many people have heard of the likes of Origin Broadband etc.And if you have never heard of a product you are very unlikely to buy it in most cases.
Posted by GMAN99 over 4 years ago
"What a waste doing fttc when they could have done fibre."

For the same coverage and fibre? Sorry but the figures don't compute
Posted by tmcr over 4 years ago
Here in DN4 the publicity for DR was zilch, nobody knew about it. When I found out I contacted 3 of the ISPs for info, only 1 replied. Projected speed was half what VM or BT could give me and costs were too high.
I followed up several times, the ISP's were just not interested enough to take my order.
Posted by NetGuy over 4 years ago
I don't think the idea was worthless, but like many similar strategies (where local authorities or Govt funding gets involved) these things can be made too burocratic (with endless 'planning' before 'doing' anything), and/or fall down in the implementation (in this case, Public Relations/ promotion).

Posted by NetGuy over 4 years ago
I once made contact to determine "Which areas are live?" and explained I was in Wales "and looking to move to Cheshire or Yorkshire". Sad to say the response ignored the fact I wanted to MOVE TO A DR area, and just said "sorry, we don't serve Wales or Cheshire".

Words failed me that someone was unable to see I wanted a list of postcodes/ towns where I could have a DR connection and would move to where it WAS working...
Posted by NetGuy over 4 years ago
here's EXACTLY what I asked:

I would like to know which areas already have service, so my process of "find a house, get a postcode, check for internet access" can be shortened to "find a house where there's a higher chance of fast internet, etc".

in the reply was "Unfortunately our service will not cover Cheshire. It is only being rolled out in South Yorkshire." Daft, or what?
Posted by pcoventry76 over 4 years ago
I want to see what Ash thinks of this. As he is on this I think.
Posted by acpsd775 over 4 years ago
@pcoventry76 would you be on about me here ?
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