Rural and less densely populated areas could lose out on super-fast broadband because of costs, a report from the Government’s broadband advisory group has warned.

The third in a series of reports from the Broadband Stake Holders Group (BSG) said costs could top £28.8bn. But although this is a nationwide figure and depends on the type of technology used, the costs of deploying in rural areas will far exceed those in urban areas.

The report said this implies that, if a commercial case for deployment exists, the market should be able to deliver to only approximately two-thirds of the UK population.

Antony Walker, the BSG’s chief executive, said: “If rural areas are to be served in a reasonable time frame, thinking needs to start now about creative solutions for making them more attractive to investment."

The BSG considered three technologies and the associated costs of deploying these to homes and businesses nationwide.

The cheapest option, at £5.1bn, is fibre to the cabinet (FTC). This means running fibre optic cables to cabinets placed on streets. This acts as the connection point between homes and local exchanges.

To get broadband services into homes the existing copper cables would be used as they are now. The BSG estimates that this system would give speeds of between 30-100Mbits/sec.

The other two options involve taking fibre to homes via either a Gigabit passive optical network (Gpon) or using point to point fibre (PTP) connections.

Gpon networks would provide up to 2.5Gbits/sec but is typically shared by more than one customer.

PTP is a dedicated connection capable of providing up to 1Gbits/sec. These are the most expensive options and could cost upwards of £25.5bn and £28.8bn respectively to roll out.

"The magnitude of the costs, and how the costs differ between urban and rural areas, will be important for operators, media players and public sector organisations looking to develop their future broadband strategies" said Matt Yardley, partner at analysys Mason, which put together the report.

The largest single cost component is the civil infrastructure (the cost of deploying and installing the fibre in new or existing ducts). The report suggests that these high civil infrastructure costs could be significantly reduced by the re-use of existing telecommunications ducts; the sharing of alternative infrastructure belonging to other utilities, such as water companies; and the use of overhead fibre distribution in some areas.

The BSG said this would mean that if fibre-to-the-home is considered, it is more likely to be used in new-build locations and other areas where it is possible to significantly reduce the civil infrastructure costs involved.

“The scale of the costs involved means that the transition to superfast broadband will be challenging. We hope that this report will help to ensure an informed public debate on the key policy and regulatory decisions that lie ahead,” said Mr Walker.