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UPDATE UK Conservative Party to Scrap 50p Next Generation Broadband Tax

Posted: 19th Oct, 2009 By: MarkJ
The UK Conservative Party has pledged to scrap plans for a 50p a month tax ('Next Generation Fund') on all fixed phone lines to help fund the deployment of next generation broadband services around the country. The proposal formed part of June's final Digital Britain report (here) and could rake in around £175m per year, which many believe would not have been enough anyway.

The existing Labour government, which authored Digital Britain, would understandably prefer not to see it scrapped and is trying to rush the levy into law (i.e. Queens Speech) before next year’s general election (here). This would of course make it more difficult to remove, albeit not impossible.

The report itself set a target of 2017 for 90% of UK homes and businesses to be within reach of next generation broadband lines and the levy was seen as critical for achieving this. However many people fear that, after its usefulness had expired, the 50p levy could quickly turn into being "just another tax" (i.e. like road tax, which doesn't seem to get spent on roads).

The Director of UK ISP AAISP , Adrian Kennard , told us in an interview today (read it):

"I really cannot see how this 50p tax is going to work. Just defining a "fixed phone line" is going to be a nightmare. I am also very sceptical that this is not just another tax. Fibre optic solutions are an obvious next step for the technology, and the cost of deploying any large scale new technology is high, especially in rural areas. I am sure it will happen over time, and if the government offer any realistic money for this I am sure telcos like BT will take the money and spend it to make that happen."

The move will be good news to the ears of many and cause frustration for others, not least any operator that could of stood to benefit. We feel that a far better solution would have been for the government to cut the tax on fibre lines, although it's worth pointing out that neither of the two main political parties appears to have even thought about doing that.

Concerns have also been raised about the difficulty in ensuring that revenue from the tax would be fairly distributed. Conservative Shadow Culture Secretary, Jeremy Hunt, said the party would seek to scrap it "as soon as possible" after the next general election.

UPDATE - 1:11pm

In response to Jeremy Hunt's interview today, in which he promised to abolish the broadband tax being proposed by the government, Professor Martin Cave OBE, a telecommunications economist at the University of Warwick, has issued the below reaction:

Martin Cave OBE told ISPreview:

"The UK is by no means at the top of the pile when it comes to broadband quality, but it is leading the way in developing plans to improve its ailing infrastructure through the Digital Economy Bill expected to be published next month. The only sticking point to this legislation is who should pay for the infrastructure upgrade.

Large-scale fibre optic investment is essential to the development of super fast broadband in the UK and government policy makers must resist introducing any sort of regulation that deters private companies from spending the money needed to upgrade the internet infrastructure.

Few investments offer greater economic potential than expanding broadband access. Securing investment in high-capacity networks relies on a policy framework that supports investment. Those investing in new lines must be able to guarantee the efficient flow of traffic over the internet and charge appropriately for their services."

Cave is supporting Hunt’s position on the broadband tax and highlights the need for private investment in next generation networks, rather than government subsidies. Though we can't see how private investment alone will solve the digital divide, well maybe in 15 or 20 years but that is surely unacceptable.
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