George Osborne broadband growth plan abandoned over state aid complaints - Telegraph
George Osborne has been forced into an embarrassing climbdown over a £150m ultrafast broadband scheme that was meant to spur growth outside London.

The Chancellor barely touched on broadband during his Spending Review statement on Wednesday, despite the top billing given to infrastructure investment.

It came hours after the Department for Business announced that plans for brand new fibre optic cables in 22 British cities had been abandoned in favour of a voucher scheme targeting small businesses. Mr Osborne announced a major expansion of the plans only six months ago in his autumn statement.

The government had intended to fund Birmingham, Edinburgh, Manchester and other councils to commission new infrastructure, offering businesses internet access several times faster than available currently.

Instead businesses will have to apply for a total of up to £90m in vouchers that will pay for initial costs of connection to typically slower, existing broadband networks. Only those with fewer than 250 employees will be eligible.

The scheme was radically downgraded after BT and Virgin Media joined forces to oppose what they said amounted to illegal state aid to competitors in cities where they were investing in their own networks. They sued to block the first £10m project by Birmingham City Council.

The telecoms giants welcomed the Government climbdown on Wednesday.

“Where companies are already investing in world class connections, government has recognised public money should not be used to build more networks,” said a Virgin Media spokesman.

Much of the remainder of the £50m funding pot will still go towards funding large public Wi-Fi networks in urban areas.

The “Super-Connected Cities” initiative is separate to a £530m subsidy pot targeting broadband infrastructure in rural regions where BT and Virgin Media say there is no commercial case to invest. The chief secretary to the Treasury Danny Alexander is expected to provide an update on that scheme tomorrow amid claims that deadlines are not being met.