Plans to increase the volume of local news content through video available to broadband internet users have been rejected by the BBC Trust.
A public value test was conducted in order to gauge the demand for the service from licence fee-paying viewers.
It was concluded that broadband-only local news via online video would not be in the best interests of the public.
"The Trust is committed to improving regional and local services from the BBC for licence fee payers but a broadband-only local video news proposal is unlikely to achieve what they want," explained BBC trustee and chairman of the Strategic Approvals Committee, Diane Coyle.
She went on: "Instead, we believe the BBC's priority should be improving the quality of existing regional services."
The £68 million which would have funded the project has been set aside in case new proposals are put forward.