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TalkTalk steps up attack on government

Dunstone claims broadband tax will disconnect 100,000

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Charles Dunstone, the TalkTalk boss with links to the Conservative Party, has launched an attack on the government's plan for a 50 pence per month tax on every landline to fund rural fibre rollout.

He claimed today the £6 per year levy will mean 100,000 low income households will be forced to disconnect their broadband.

"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," Dunstone said.

"This is wholly inconsistent with the government's plans to tackle digital exclusion by increasing uptake and use of broadband."

TalkTalk competes at the budget end of the market and recently swallowed rival Tiscali to become the over second largest consumer broadband provider, ahead of Virgin Media and behind BT.

The landline tax was announced in June but has not yet been implemented. Ministers have indicated the necessary legislation will be included in the Queen's Speech later this month.

It's estimated that it will bring in about £175m per year, which will be used to subsidise fibre in regions where a sparse population means there is no purely commercial case.

BT has so far committed to fibre rollout to cover 40 per cent of premises nationally by 2012. It plans to monitor take up of service before investing further, and says without government help there will be no commercial case to improve broadband for the last third of premises, in rural regions.

It is expected that local consortia and start-ups will also bid for cash from the landline tax.

Dunstone said the planned subsidies will hinder rather than help rural rollout, however.

"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," he said.

"This will mean that much of the tax will be wasted investing in networks that the private sector would have built itself anyway."

The attack opens up a second front in Dunstone's war on Lord Mandelson's internet policies*. TalkTalk's PR firm Citigate is orchestrating an intensive public and media campaign against plans to impose restrictions on - and eventually cut off - the most persistent illegal filesharers.

Dunstone's firm has been the most vocal industry voice against both policies. They are natural lobbying targets: the tax (which will be collected by providers) and copyright enforcement regime (which will add to technical and administration costs) stand to hit him in the pocket.

Dunstone also has a political axe to grind, however, and his pronouncements have very much taken the Tory line. They have pledged to drop the tax and have criticised the proposed enforcement regime.

As well as being close to the party, the Carphone Warehouse founder is a friend and near neighbour of Tory leader David Cameron in Oxfordshire. Dunstone is also thought to be in line for a peerage and possibly a ministerial brief under a Cameron government. ®

*Although it doesn't appear to personally bother Mandy, who turned up to Dunstone's wedding last month. As did one of Girls Aloud.

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