Digital Britain: 50p tax to pay for next-generation broadband

 

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Posted on 17 Jun 2009 at 08:34

The UK government is to impose a monthly 50p tax on all telephone lines, with the money going to fund investment in next-generation broadband networks.

In his Digital Britain report, communications minister Lord Carter said that the “supplement” is necessary to ensure that next-generation access (NGA) covers at least 90% of the population.

“It it seems unlikely, particularly in a period when capital markets are severely constrained, that private investment or publicly available financing will provide the investment necessary to roll out NGA such that coverage can reach ADSL or mobile coverage levels,” the report says.

To ensure that it does, the government is proposing the Final Third Project.

“The Final Third Project would need to focus resources on geographic areas where the market would not otherwise invest and to subsidise only that activity which contributes to next generation broadband deployment. For this reason we do not believe tax incentives for investment would be the best means of delivery. A form of targeted subsidy is likely to be more effective and deliver better value for money.“

That subsidy will come from the 50p tax on all fixed copper lines, both residential and business phone and internet connections.

Carter says that the tax should be set in the context of the significant fall in telecommunications prices over recent years, with UK prices among the lowest in Europe. The UK currently has the second cheapest prices in Europe for broadband only DSL, the third cheapest for voice and broadband DSL, and the fourth cheapest for voice line rental.

“Against that background, the Government believes that it is right to share a small part of that saving, and that a Next Generation Fund supplement of 50p per month on fixed lines represents a fair and sensible national investment to ensure that the overwhelming majority of the country can get access to next generation broadband.”

Low income households on social telephony will be exempt.

Carter expects the tax to raise up to £175 million a year, which “might be sufficient to make investment in connecting most of the Final Third by 2017 as commercially viable as connecting the first two thirds of the population.”

Author: Simon Aughton