Virgin Media and BT in broadband subsidy row

Countryside campaigners have complained that broadband projects are taking too long to deliver

The government risks "sleepwalking into another monopoly" in the way it is allocating funds for rural broadband, shadow business minister Chi Onwurah has warned.

The Labour MP says she plans to tell the House of Lords communications select committee on Tuesday that the current system is "skewed towards BT".

Rival Virgin Media has already accused the government of subsidising BT.

BT says that others are welcome to bid for funds.

Open networks

Counties around the UK have been allocated a share of £530m of government cash. The aim is for them to match the funding and appoint firms to roll out super fast networks in their areas.

But the process has been slow. So far, just two contracts have been awarded - in Lancashire and Rutland. Both have gone to BT.

BT rivals Fujitsu and Cable & Wireless have withdrawn from the process in many areas - leaving the telecoms firm as sole bidder in some places.

<link> <caption>In a letter published by the Guardian newspaper</caption> <url href="http://www.guardian.co.uk/technology/2012/may/21/virgin-media-andrew-barron-letter" platform="highweb"/> </link> , Virgin Media chief operating officer Andrew Barron said it was not in consumers' interests for BT to win all the contracts.

"If we agree competition is the best way to encourage further sustainable investment, and that embedding dominance in markets is bad for consumers, we must also accept that providing the vast majority of available public funding to an incumbent is not in the UK's best interests," he said.

The money would be better spent funding alternative networks such as 4G and wi-fi, he added.

In response, BT called on Virgin Media to open up its network to rivals.

"BT would be more than happy to compete directly with Virgin for BDUK funds but we doubt that will happen. That is because Virgin have steadfastly refused to provide open wholesale access to their network - a key BDUK requirement - and because they have shown no interest to date in supplying rural areas with broadband," a BT spokesman said in a statement.

"This is in contrast to BT who offer broadband services on a wholesale basis to 99% of UK premises. Fujitsu have announced their intention to bid for funds and so there will be a competitive process. We are already seeing this in several parts of the UK."

Sums

Ms Onwurah told the BBC that she was not impressed by BDUK - the group set up by the government to oversee the government's broadband strategy.

"BDUK does not regard competition as its responsibility. We risk sleepwalking into another monopoly," she said.

"BT is in an advantageous position because it has an existing network. Fujitsu is always going to have higher costs," she added.

Virgin Media has publicly thrown itself behind Fujitsu plans.

Project failure

Andrew Ferguson, editor of broadband news site ThinkBroadband, said the system set up by BDUK was not perfect, but at least it was getting broadband to rural areas faster than before.

"Certainly the way the funding has been set up does favour the large telecoms companies, and particularly those that have a big presence and wholesale service already up and running. Short of excluding the BT group from bidding, almost any system would have seen them getting a large chunk of the projects," he said.

But he argues that is not such a bad thing.

"If the money had been spent on new start-ups, then it is possible that some projects would have failed, requiring further investment by the public purse to avoid collapse," he said.