Broadband tax comes under fire

Critics of the government's Digital Britain plan say it over-emphasises fibre and ignores the potential of satellite technology

In a development that will please critics of the proposed 50p broadband tax, attendees at a government Business, Innovation and Skills Committee meeting last week suggested that the market would find other ways of reaching the final “unconnected” third of the population.

The tax proposed in the Digital Britain report to aid broadband rollout would therefore be unnecessary, they argued. The meeting was attended by MPs from all the main parties as well as representatives from the telecoms industry.

David Williams, chief executive of Avanti, a company that hopes to provide broadband to rural areas via satellite, told the committee that the Digital Britain report had over-emphasised the importance of fibre networks.

“Digital Britain did a poor job of explaining that technology neutrality is a good thing,” he said. “I’m a firm believer that the market will solve this problem eventually.”

Avanti will launch its first broadband satellite next year and hopes to launch another two years after that. Williams made it clear he needs no state subsidy to reach broadband customers and that his offering will be competitively priced.

In addition, last month the digital switchover of television broadcasts freed up much of the radio spectrum for mobile operators to offer wireless broadband.

The government says the new spectrum will allow operators to bring mobile coverage to 99 per cent of the population over the next five years.

Other ISPs argue that further progress can be made on the ground. They claim that if they were allowed to roll out fibre to street cabinets themselves rather than relying on BT’s infrastructure, they might well be able to connect to more rural communities.

Under the current model, BT Openreach provides the fibre infrastructure across which other ISPs can deliver their offerings.

But Aidan Paul, chief executive of Vtesse, said this means BT has a monopoly on deciding which rural communities will need fibre.“The market is currently closed to us,” he said. “We want access to BT’s fibre.”

Liberal Democrat MP Mark Oaten pointed out that some firms, such as H2O Networks, are laying fibre through the sewers to extend the network to homes in those cities.

“If [BT] is not getting to the final third, let some local regional outfits with alternative ways have a bite of the cherry,” he said.

However, Tim Whitley, BT’s strategy director, defended the firm’s position of not allowing others further access to its network.

“No one else is providing broadband to areas that we aren’t reaching without some form of subsidy,” he said.

Market alternatives such as those outlined above could negate the need for the tax proposed in the government’s Digital Britain report. The tax, which is forecast to raise £1bn, is set to be introduced in 2010 and will last for about seven years.

In addition, the views expressed at the Business, Innovation and Skills Committee will please the Conservatives. Last month, shadow culture secretary Jeremy Hunt said that a Conservative government would scrap the broadband tax and leave rollout to the market.

While Hunt’s pledge to axe the tax is doubtless designed primarily to appeal to cash-strapped voters before the election next year, his position is supported by ISPs.

For example, TalkTalk’s chief executive Charles Dunstone said last week that the tax would actually be counterproductive because it would lead to 100,000 low-income homes dropping their broadband because they could not afford it.

He said: “This is an unjust and regressive tax on all phone customers that will subsidise mostly richer rural households that can afford high-priced, superfast broadband services.”

Rather than introduce the tax now, TalkTalk believes the government and Ofcom should concentrate on enabling private sector investment and ensuring effective competition.

However, the problem with relying on competition to deliver the results is that it may take some time for alternative solutions to reach the market. But should the Tories get into power next year, the race to find alternative means of broadband provision is on.