Page last updated at 14:14 GMT, Wednesday, 17 June 2009 15:14 UK

Experts question UK broadband tax

Jeremy Paxman challenges communications minister Lord Carter over plans to tax fixed phone lines to pay for broadband expansion.

One of the biggest surprises in the Digital Britain report was the news that everyone with a fixed line telephone would pay a broadband tax.

At 50p a month the amount is unlikely to break the bank but experts are already questioning what it will buy.

Some believe it will mean the majority of homes can benefit from fast networks within a decade.

Others question whether Gordon Brown's vision of "access for all" is achievable.

Antony Walker, chief executive of the Broadband Stakeholder Group, thinks that the money needs to be targeted at rural areas.

He believes that, spent wisely, the money should ensure that the 30% of the country estimated to be bypassed by commercial fast broadband plans can enjoy speeds of up to 50Mbps (megabits per second) by 2017.

Shadow Culture Secretary Jeremy Hunt denounced the phone line levy as a 'broadband tax'.

BT already plans to upgrade 40% of UK homes to so-called Fibre to the Cabinet technology (FTTC) by 2012, although it will be targeting the easy-to-reach urban and suburban areas.

Virgin Media is also upgrading its network so it can deliver speeds of up to 50Mbps. Its network is available to 50% of homes in the UK, again mainly in urban and suburban areas.

Broadband maths

For Ian Fogg, analyst with Forrester research, the sums don't stack up.

"There are around 34 million fixed lines in the UK and at £6 a year this is going to raise in the low hundreds of millions each year. This is some way off BT's budget of £1.5bn to put fibre in 40% of homes by 2012," he said.

Graphic of a house

"There is going to be a two-tiered internet for a long time, whether the government likes it or not," he said.

Andrew Ferguson, editor of broadband website ThinkBroadband, estimated that the government would raise around £170m a year from the broadband tax.

"It will depend on how many people give up their fixed line because of the 50p a month tax but over the years will raise around the same amount of money as BT is investing," he said.

But because the money is earmarked for the final third of the country, with many homes lying miles away from existing networks, it is going to cost a lot more to supply them with fast net services.

BT has estimated that to provide FTTC to every UK home would cost around £5bn.

Mr Walker said it was important to remember that the tax was a top-up fund.

"It may not sound like a lot of money but it is a subsidy to support commercial investments," he said.

If BT or other operators are prepared to share half the cost of rollout the plan to fibre-enable 90% of the country by 2017 might work, thinks Mr Ferguson.

The process of collecting and putting the money out to tender will take two to three years to set in motion, he predicted, suggesting that it may have been easier just to give the money to BT.

"BT would have had to give access to other providers. It might have been easier but would have been more politically charged," he said.


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World leader

The government has also set aside around £200m to roll out slower broadband (of speeds of no less than 2Mbps) to so-called notspots, estimated to account for around 2.5m homes.

Some think that this figure is not going to be enough and worry that the money raised from the broadband tax could be used to fulfil this more pressing goal.

Prime minister Gordon Brown has said that broadband is as essential as water, electricity and gas and pledged that the recommendations of the Digital Britain report will offer access to all families.

He said the report would make the UK the broadband world leader.

But not everyone is convinced.

"It doesn't guarantee global leadership but the UK is in a better position today than it was before the report," said Mr Walker.

Few of the recommendations are likely to hit the statute book before the next general election and could be abandoned by any new government.


Stephen Garrett from Kudos, the firm behind Spooks and Ashes to Ashes, warns that illegal file sharing made possible by high speed broadband threatens the existence of hit TV shows.

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