Original URL: http://www.theregister.co.uk/2010/02/23/broadband_tax/

MPs bash broadband tax

Rural subsidies 'unfair' and 'regressive'

By Christopher Williams

Posted in Broadband, 23rd February 2010 11:11 GMT

MPs have branded the proposed 50p per month "broadband tax" unfair, arguing the government should allow market forces to decide who gets faster broadband.

The levy, due to be imposed on every landline telephone account, is intended to raise £175m per year to subsidise the rollout of next generation internet access to sparsely populated areas, where BT doesn't believe investment in fibre would be profitable.

Today the cross-party Business, Innovation and Skills (BIS) Committee sharply criticised the idea of everyone paying to expand the reach of faster broadband to the countryside.

BT has so far committed to commercial next generation deployments covering 40 per cent of premises - focused on urban areas - by mid-2012. It has said it is not commercially viable to deliver fibre-to-the-cabinet or fibre-to-the-premises to about a third of the country, however.

The government responded to such claims by announcing the tax as the centrepiece of its final Digital Britain report in June.

"We believe that a 50 pence levy placed on fixed telecommunication lines is an ill-directed charge. It will place a disproportionate cost on a majority who will not, or are unable to, reap the benefits of that charge," the Committee said today.

The MPs argue that direct government intervention early in the deployment of next generation broadband could amount to "distorting the market". A reduction in taxes on infrastructure would offer better value, they chraged.

"We believe that the Government should consider a reduction, or even a temporary removal, of business rates on fibre optic cable," said Conservative chairman Peter Luff.

"This would be a more effective use of limited public sector funds than direct financial intervention."

Their criticisms of the tax could prove academic. It forms part of the forthcoming Finance Bill, and so under a consultation that closes at the beginning of April. It is unlikely to be passed before a general election and even if it is, the Tories have pledged to scrap the broadband tax "as soon as possible" if they form the next government.

The BIS Committee today claimed effort would be better spent on delivering universal broadband service at 2Mbit/s, a policy announced by the government in parallel with the next generation subsidy. At the time Lord Carter, responsible for the Digital Britain report, described it as "an aspiration to a floor of up to 2Mbit/s".

MPs today expressed concern that the government "has not defined what 2Mbit/s will mean in practice".

"[The BIS Committee] believes that the definition should be the delivery of a minimum 2Mbit/s, under normal circumstances, to all users at all times," they added.

"In times of great stringency in public expenditure digital inclusion, not next generation access, should be the priority for expenditure." ®