The government has launched a £4m fund to back projects trialling running fibre optic broadband cables through water pipes to help connect hard-to-reach homes without digging up roads.

The money will also be used to test out monitors in pipes that can help water companies identify and repair leaks more quickly. About a fifth of water put into public supply every day is lost via leaks and it is hoped that sensors could help deliver water companies’ commitment to reduce water loss by half.

Infrastruture works, in particular installing new ducts and poles, can make up as much as four-fifths of the costs to industry of building new gigabit-capable broadband networks, the government said.

The project is designed to help cut those costs, and is part of a plan to improve broadband and mobile signals in rural areas.

The digital infrastructure minister, Matt Warman, said: “The cost of digging up roads and land is the biggest obstacle telecoms companies face when connecting hard-to-reach areas to better broadband, but beneath our feet there is a vast network of pipes reaching virtually every building in the country.

“So we are calling on Britain’s brilliant innovators to help us use this infrastructure to serve a dual purpose of serving up not just fresh and clean water but also lightning-fast digital connectivity.”

The fund has been launched after the government in June kicked off a call for evidence on how more than a million kilometres of underground utility ducts could be used to boost the rollout of next-generation broadband.

A consortium, which could be made up of telecoms companies, utility providers and engineering companies, will be selected to deliver the project. Applications are due by 4 October and any proposal will require approval by the Drinking Water Inspectorate.

Electricity and gas companies, water and sewer networks and telecoms groups have until 4 September to respond to the consultation on changing regulations to make infrastructure sharing easier. Broadband cables have already been deployed in water pipes in other countries including Spain.

Although more than 96% of UK premises already have access to superfast broadband, providing download speeds of at least 24 Mbps, according to the government, just 12% of the UK has access to faster speeds via full-fibre broadband.

A report out last year suggested the government’s ambition to provide next-generation fibre broadband to every home by 2025 is likely to be missed, unless issues including pricing and concrete plans on reaching remote towns and villages are addressed. That ambition was a key promise of Boris Johnson’s election manifesto.