Analysts at research group Point Topic have found that the money raised by the governments proposed 50p tax on all fixed telephone lines will be "more than enough" to support the rollout of next generation broadband to serve over 90% of the UK population. However they criticise the 2017 target as being "rather slack" and suggest that it should be brought forward to 2015.

The "supplement" itself was proposed last month as part of Lord Carter’s final Digital Britain report (here). The money raised would go to a Next Generation Fund and aim to deliver next generation broadband services to 90% of UK homes and businesses by 2017.

Interestingly the study notes that BT has committed to achieving next-generation coverage of 40% of the UK by the end of 2012, though Point Topic’s current forecast is that it will slip by a year to end-2013. However this will be a short term blip and the fast pace of BT’s rollout should ultimately overcome any shortcoming.

Still, many other commentators have said such funds would not be enough and the objective is far short of what is required. Indeed a little basic math does appear to show that it would fall around half way short of the needed funds (around £3bn). But Point Topic has an interesting twist on this, as pasted below.


It's understandable that next generation broadband services would cost more, thus adding to the overall revenue. That's no surprise, faster and more flexible products have always carried a premium (e.g. Virgin Media's 50Mbps package costs around £15 more per month than its 20Mbps one, depending on how you bundle it). Though we have doubts about that 60% take-up assumption, we think consumers will take a lot longer to be attracted to the benefits, especially if it costs more.

More generally, Point Topic believes that broadband density (the estimated number of broadband lines per sq km) is the best single indicator of the “next-generation attractiveness” of an area. To put it another way, the economic viability of a dense urban environment is more profitable than a sparse rural one, which is again nothing new.

Point Topic has broken these areas down into three groups, which it details in the full report - HERE. The short of this is that they believe the subsidy created by that 50p tax can go a lot further than most people think, provided it's distributed intelligently. Then there's the matter of service performance.


However what Point Topic appears to miss in its competent research is the political and competition angle. The government will need to avoid breaking state aid rules, thus it can't just push all the cash over to BT and or Virgin Media to do all the leg work as that could be perceived as going against market competition.

Instead it's quite possible that the funds may end up being distributed in a fair, if perhaps not totally efficient, way. After all, this is the same government that allowed our whole banking based economy to collapse without noticing the obvious problems that were building up underneath. Expecting them to get such a huge task of financial organisation right is a bit like hoping Osama Bin Laden someday becomes a likable fellow.