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TalkTalk UK ISP Boss Criticises 50p Next Generation Broadband Tax

Posted: 02nd Nov, 2009 By: MarkJ
charles dunstoneCharles Dunstone, the boss of budget conscious broadband ISP TalkTalk ( The Carphone Warehouse ), has today attacked the UK government’s plans to impose an "unjust" 50p a month tax on all fixed phone lines (Next Generation Fund). The tax itself is supposedly designed to help boost deployment of new superfast broadband networks (i.e. fibre optic lines / FTTH etc.), though Dunstone fears that it could have the opposite effect.

The Digital Britain report (here) set a target of 2017 for 90% of UK homes and businesses to be within reach of next generation broadband lines and the levy is seen as critical for achieving this. But there are fears that, after its usefulness has expired, the 50p levy (generating up to £175m per year) could quickly turn into being just another tax (i.e. like road tax, which doesn't seem to get spent on roads).

Concerns have also been raised about the added cost for low income families, the difficulty in gaining fair distribution of the money itself, how the government might define a fixed phone line in the first place and the fact that the tax might not be enough to do the job. Suffice to say, Dunstone echo's these.

Charles Dunstone commented:

"This is an unjust and regressive tax on all phone customers which will subsidise mostly richer rural households that can afford high-priced super-fast broadband services. As well as being unfair, we estimate that the increase in price will mean that more than 100,000 mostly low-income homes will be forced to give up their broadband lines. This is wholly inconsistent with the Government's plans to tackle digital exclusion by increasing uptake and use of broadband.

Crucially, the scheme is likely to delay next-generation broadband roll-out in rural areas rather than hasten it as private investors will wait for public funds to be made available. This will mean that much of the tax will be wasted investing in networks that the private sector would have built itself anyway."

It's easy to see how any extra tax on low-income groups could be problematic, though the idea that next generation broadband would only be affordable by "mostly richer rural households" is a bit flaky; budget conscious packages will no doubt be available.

We feel that a far better solution to the problem would have been for the government to remove or reduce the tax on fibre lines, which would make it easier for the private sector to invest in connecting more remote locations. Sadly there appears to be no government knowledge or support for this idea, including among opposition parties.

Speaking of political opposition, the UK Conservative Party has pledged to scrap the 50p tax, though this has prompted the labour government to rush the levy into law (i.e. Queens Speech) before next year’s general election. That would make it far more difficult to remove, assuming the Conservative’s actually won.

The 50p tax certainly seems to have plenty of opponents right now. However, playing devil’s advocate for a moment, we can't see how - without a cut in the fibre tax - private sector investment alone will solve the digital speed divide, well maybe in 15 or 20 years but that is surely unacceptable.
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