COUNCIL chiefs across the region must improve their plans for delivering 'super-fast broadband' - or miss out on millions of pounds of government cash.
The rating means ministers are not certain that satisfactory broadband plans will be in place, with a deadline of the end of February looming fast.
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A department for culture, media and sport (DCMS) spokesman said: "We think they can meet the deadline - but it will be pretty tight."
Worse, four other North-East authorities, Newcastle, Sunderland, South Tyneside and North Tyneside, have been given a 'red light' - meaning their broadband plans are in deep trouble.
Ministers will meet with each of the councils within weeks, the spokesman adding: "We have not seen a great deal from these councils. We need to meet them very soon."
And Ed Vaizey, the broadcasting minister, said: "We do not intend to continue to fund councils if they continue to fail to deliver."
At stake is more than £4m of government cash, designed to deliver broadband speeds of 24 megabits per second (24Mbps) to the vast majority of households and businesses.
Grants were offered to both the Tees Valley (£0.77m) and Tyne and Wear (£3.42m) last summer, provided they showed how broadband would be delivered - and came up with matching amounts.
North Yorkshire County Council has already had its plan and allocation (£17.84m) approved and Durham County Council (£7.79m) is expected to, by the end of February.
But, last night, Darlington Borough Council insisted there was nothing to worry about, saying: "Bringing superfast broadband to our area is hugely important.
"It will enable businesses to transact quicker and residents will benefit from faster internet access. Our work on the plan continues and we are on track to meet the government's deadline."
Newcastle Council also insisted it was making good progress on broadband, had a clear plan and would meet the deadline set.
The cash was offered after figures showed nearly 650,000 properties across the North-East and North Yorkshire will not enjoy a broadband speed of even 2Mbps, if expansion is left to private companies alone.
The government's pledge is for everyone to enjoy at least 2Mbps and for 90 per cent of homes and businesses to boast super-fast, speeds, tackling the problem of "not-a-lot-spots".
The DCMS is considering running a national procurement for areas that fail to come up with convincing Local Broadband Plans.
Culture Secretary Jeremy Hunt has hailed the programme - worth £363m across Britain - as delivering "the best superfast broadband network in Europe by 2015".