Virgin Media and BT are taking legal action over the development of ultrafast broadband infrastructure by Birmingham City Council.

Objecting to plans for Birmingham City Council to spend £10m of Government money on the installation of high-speed fibre optic cables, the two telecoms companies have questioned the appropriateness of recently granted European Commission approval.

Birmingham received a share of the Government’s £114bn Urban Broadband Fund in September after a State Aid decision by the European Commission green lit the city’s Smart City programme.

The authority’s proposals are set to see Birmingham City Council intervene in the existing telecommunications market place and unite with a delivery partner to install the broadband infrastructure.

However both BT and Virgin Media have highlighted that a similar network may already support the area and have questioned the application of public funds for such a scheme.

Cllr James McKay, cabinet member for a green, safe and smart city at Birmingham City Council, said: ‘Birmingham is extremely disappointed in Virgin Media’s decision to appeal this landmark ruling. The city has worked in a very positive and collaborative way with them over the last few years to help inform and develop our business case and we are surprised that they have now chosen to appeal at such a late stage.

‘This decision has the potential to damage the creation of up to 1,000 new jobs, preventing up to £200 million per annum of GVA being pumped back into the economy. We are liaising with Government and the European Commission and we are advocating that this matter be treated with some urgency as a ‘test case’ for Europe and that everything that can be done to expedite it through the legal process is done,’ Cllr McKay added.

A Virgin Media spokesperson said: ‘We fully support the Urban Broadband Fund and government ambitions to bring superfast broadband to areas not currently served by existing fibre networks. So it’s disappointing that Birmingham City Council has put forward a scheme which is not in the interests of local people and we believe, as a result, the European Commission has made a decision based on inaccurate and misleading information which could waste public money.’

A BT spokesperson said: ‘We can confirm we have made an application to annul the Commission’s decision. It would have discouraged commercial investment in high-speed networks at precisely the time when such investment is required. It would also have set a dangerous precedent. We hope an alternative solution can be found as soon as possible so that companies such as BT can invest further in Britain’s cities.’