Chancellor George Osborne's £150m plan to create a better super-fast broadband infrastructure in British cities has hit a major roadblock following legal challenges from BT and Virgin Media.

The plan was to build new networks beyond the existing BT and Virgin lines in order to boost connectivity in homes and businesses to between 80-100Mbps in 22 cities.

The 'super-connected' plan, integral to Osborne's pledge to bring universal broadband coverage by the end of 2015, would have improved speeds in 1.7m homes and 200,000 premises, while bringing high-speed Wi-Fi to an estimated 3 million people.

However, BT and Virgin contested the fixed-line element of the scheme, claiming that rival companies like Sky and TalkTalk would have benefitted from the government cash.

As a result, the government didn't bother applying to Brussels for permission to splash the cash it had promised to spend.

Voucher scheme

Although, as The Guardian reports, the wireless element of the plan will continue, the rest of the scheme has now been hugely scaled back.

Instead of building the new networks, Osborne will give vouchers to businesses to spend on upgrading their broadband package on the existing infrastructure.

However, those vouchers will only fund speeds of up to 30Mbps, rather than the 80-100Mbps quoted by the original scheme.

The news on Tuesday night came following reports from the BBC claiming councils awarded grants for super-fast broadbrand had only received a total of £3m from the £530m government pot.

That end of 2015 deadline might be more than two years away, but it's already looking like the goal of making Britain the best nation in Europe for super-fast broadband might be out of reach.