Brazil’s plans to bring at least 25Mbps fiber broadband to 45 percent of Brazilian households by 2018 are on hold after private providers balked about spending the money.

The Ministry of Communications’ ambitious Broadband for All program is a public-private partnership. Public broadband expansion funding would be matched by generous tax credits to encourage private matching investments to improve Brazil’s telecommunications infrastructure. Telephone customers already pay a tax on their telecom bills to fund Brazil’s version of the Universal Service Fund, which helps subsidize expenses in high cost service areas.

The plan derailed after investment markets saw little opportunity for big profits from a fiber upgrade. Brazil’s president Dilma Vana Rousseff embarrassed her Minister of Communications Ricardo Berzoini, who had already publicly announced plans to get the upgrades started last month.

A source close to the president told Reuters the government has sided with commercial providers and is slowing the project down for now.

“We have to adjust the timing of investments to adapt to the appetite of the market and public finances,” said the source, who spoke on condition of anonymity.

A less ambitious expansion program is tentatively scheduled to start in mid-October, but is only likely to incrementally improve broadband in larger cities.

At least one company balked about poor revenue and profit opportunities serving economically challenged regions in Brazil. It argued the population lacked enough income to pay the prices they intended to charge for fiber service.

Community and broadband activists complain critics have demagogued the effort from the beginning with stories of wiring fiber across vast expanses of the Amazon Rain Forest that would ultimately serve few, if any customers. After years of sub-standard service, many believe broadband should be provided and regulated like an essential utility. Currently, only landline-based broadband is regulated in the public interest.

For the consumer protection agency PROTEST, fast broadband is essential to society and where private providers have dropped the ball, the Brazilian government should pick it up and build broadband networks itself, using the proceeds of the Universal Service Fund.

“This deference to big telecom companies to decide Brazil’s online future is a huge mistake,” complained Carlos Filho, an Internet user in Cuiabá, the capital city of the state of Moto Grosso. “I cannot even get 1Mbps DSL in my downtown apartment. You have to use wireless, which is very expensive, to get anything done. The government should be building broadband like it builds roads.”

This afternoon, officials from the Ministry of Communications will meet with Russian Deputy Communications Minister Rashid Ismailov in St. Petersburg to seek Russian investment in Brazil’s wireless and rural broadband ventures.