Campaigners at B4B (Broadband4Britain) today criticised government plans to donate £1bn of taxpayer's money to the rollout of public sector broadband, questioning its impact on future competition in the private sector.

The funding, announced by the DTI (Department of Trade and Industry) last month, aims to stimulate the rollout of broadband in less attractive areas. The idea is that by contracting ISPs to provide broadband networks to the public sector, including schools and hospitals, they will then be able to take advantage of those networks to provide broadband services to local residents.

But B4B believes the move is risky, with no concrete guarantees the scheme will accelerate the take-up of broadband in rural and remote areas. Campaigners are also concerned the policy will have a negative effect on future 'open and fair competition'.

Michael Ryan, partner at international law firm Arnold Porter and head of the European Telecoms Practice, believes B4B's concerns are justified. He states that in certain circumstances "an agreement under which the government gives a supplier exclusivity in order to promote the deployment of broadband could constitute illegal state aid and violate EU procurement laws".

Ryan goes on to say "The government should also be concerned about whether such agreements might undermine the development of a competitive market for broadband services." He states that it will be down to each Regional Aggregation Body (the bodies responsible for allocating government funding in each area) to ensure their plans comply with EU and competition law.

The government has placed its advert for tenders in the Official Journal of the European Union today, allowing lists of 'approved providers' to bid for the contracts, which will be awarded in February or March next year. All bids must adhere to the government's framework for awarding contracts.

"This is the same as any business tender. Some companies bids will be accepted, others won't," says a DTI spokesman who insists the process is not competitively unfair.

B4B has published a set of questions for the government in the hope of some definitive answers.

"The questions raised by B4B deserve a detailed and considered response from the DTI," says Broadband Stakeholder Group CEO Anthony Walker.

It is not yet clear when responses will be published.