Sheffield city centre - the county’s economic powerhouse - has been excluded from a £22m contract to bring superfast broadband to South Yorkshire.
The telephone exchange on Charter Row will not be upgraded as part of a scheme to bring fibre to ‘98 per cent of homes and businesses by the end of 2017’.
The county’s four councils last week signed a £22m contract with BT and the Government.
The project will go some way to replacing the Digital Region fibre network which was switched off in August - at a cost of more than £100m to the taxpayer because it was a commercial flop.
But Sheffield city centre has been hit by Government funding rules which exclude areas where a network could be commercially viable.
Richard Wright, executive director of Sheffield Chamber, said he was extremely disappointed.
He added: “It is good to see that the local authorities have reacted quickly to the demise of Digital Region.
“Broadband is a given in the modern world and lack of it is a big disincentive to investment and business.
“What is extremely disappointing is that the current scheme does not include the city center because of the vagaries of funding rules.
“I know the local authority is working on this and, whilst I understand the limitation of the rules, the city centre is probably the most important economic area in the region and it must not be left at a disadvantage.”
Eugene Walker, Sheffield City Council’s acting executive director of resources, said: “We are looking to find a solution, working with local businesses and potential commercial partners.”
A Government spokesman said: “Commercial suppliers have indicated they have plans for further roll-out in cities.”