Culture Secretary Jeremy Hunt has told local authorities that if they do not sign broadband contracts by the end of 2012 they face losing their share of the £530m funding, according to The Guardian.
Hunt told the all-party parliamentary group on local government that he plans to "put the fire up everyone's backsides" to prevent council bureaucracy from holding up broadband deployment plans.
The government pledged £530m in November 2010 to ensure that 90 per cent of households in each local authority could access super-fast broadband. This money is being administered by Broadband Delivery UK (BDUK).
The Highlands and Islands was selected as one of four rural areas, along with Cumbria, North Yorkshire and the Golden Valley in Herefordshire, to receive between £5m and £10m to pilot the latest superfast broadband fibre technology.
Hunt has asked that councils submit a broadband plan to the government by the end of February that demonstrates how they plan to bring superfast broadband to 90 per cent of the population by 2015.
"There is £530m on the table to help deliver this, but I have to say that if broadband contracts aren't actually signed by the end of this year I will consider taking this back," said Hunt.
"I do not want this to get bogged down in paper procurement," he added.
"I have always been a committed localist. I have always believed that we will solve the big problems in society if we harness the energy of the people at the grassroots, councils and their communities".
It is estimated that up to 250,000 homes in the UK still do not have access to basic broadband.
This news comes shortly after the Countryside Alliance discovered through a freedom of information request that little progress had been made by the local authorities selected to pilot superfast broadband rollout in rural areas, with some yet to spend any money on it at all.