The FT notes:
Millions of households will pay a “broadband tax” to subsidise the roll-out of superfast telecoms networks, as part of the government’s ambitions to equip the nation with a 21st century communications infrastructure.
The big surprise from Lord Carter was plans for a 50p per month levy to be paid over the coming decade by consumers and businesses with copper phone lines.
BT and Virgin Media, the fixed-line broadband operators, are committed to rolling out superfast networks that will cover, respectively, 40 per cent and 50 per cent of homes, mainly in towns and cities.
The high-speed networks will offer broadband download speeds of 40 megabits per second or more, which compares to an industry average of 3.6 mbps in October last year.
The white paper accepted that one-third of the population might not get high speed broadband without some form of targeted subsidy, because of the cost involved in extending superfast networks to rural areas. BT, and possibly Virgin Media, would be able to bid for the money generated by the 50p levy if they extended their networks to rural areas.
Analysts and lobby groups said the levy looked an effective solution to expanding superfast broadband to rural areas. BT and Virgin Media welcomed it.
Is that a tax?
Yes, of course it is. But it’s also a market correction. Marginal cost pricing will supply this service to some in the UK, but not all. And yet the service to some will not be as good as it might be if the service went to all: critical mass is key in this sector.
So this is a levy to reprice the product to ensure more can benefit in a way that the market itself apparently cannot price.
Which shows how daft markets can be, and just how sensible it can be to tax.
But there is a problem: the tax is on landlines.I can't see why the poorest (who have such lines and are dependent upon them, and no other form of telecoms in many cases) should pay this. That makes it regressive. Shouldn't the tax be on mobiles, or those already wih broadband? They're likely to be the customers who benefit. In that case this charge would not redistribute from poor to rich. As it is, this is a regressive tax, and that has to be wrong.
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Land value tax is also a market correction since with no cost of production or maintenance the land market is all externalities.
I feel I really have to comment.. broadband seems hardly worthy of the hype. It enables people to do more shopping by mail order (so spending less in the local retailers who as a consequence don’t employ so many or go bust), it boosts the package delivery services (I once visited a depot to collect something that couldn’t fit through my letter box and out of ten people visiting for the same purpose, we were all collecting items bought off Amazon), it enables us to spend even more time indoors sat on our arses instead of outside interacting with real people or at least moving around. And so what if we get 100Mb or even 2Mb connections… what is that much bandwidth good for? Downloading large files thats what.. but the media companies don’t actually want us to do that or they would have ensured we could legally download their copyright materials.. and then guess what,.. they’d probably site their businesses in places like the Isle of Man or Jersey for tax reasons….
I don’t think the internet is that great a thing that our government should be aspiring to spend our money on it if we have pressure on things like education, housing, health, social issues etc etc. and I wish I could hear a politician questioning what the government is doing.
Captain
Of course: broadband has its negative aspects
But it’s also got lots of positives: jobs where people live and less commuting for a massive start
That might be the future for tax havens for all you and I know
Richard
Richard
As an Edinburgh city centre dweller who already pays a premium for a fibre optic broadband, telephone and TV service, I wonder if I will be charged a levy to subsidise copper-wired cave-dwellers who live out in the sticks in the likes of, say, rural Norfolk??
This is specifically to subsidise higher speed broadband. Ordinary broadband (e.g. an ADSL connection such I am using right now) delivers most of the benefits, much more cheaply. I am far from convinced the subsidy is justified.
Given that the commonest use of the net to benefit from such speeds is video, you could characterise this as a subsidy for internet TV. Does it still sound so desirable?
The internet would benefit far more from network neutrality laws, which would cost very little.
This appears to me to be a tax to give the telecoms industry a handout.
High speed broadband is a good thing but the government should keep out of this apart from having a minimal co-ordinating role of some kind. The availability or otherwise of broadband is reflected in land values. And people will pay for the service if they want it. So this proposal is just pushing up land values in areas where it would not be economic to provide it, at least not fixed lines. It is an example of cross-subsidised postage-stamp pricing at its worst. If BT and Virgin think it is worth doing, they will provide it with no help from the beleagured taxpayers.
There are so many possible technical solutions that this is something that can and should be left alone. There are many utility providers with network infrastructures who could get in on this. The tax, which is not of course hypothecated, will soon rise above the trivial £6 starting level and just be yet another tax.
However, given the large scale renewal of Victorian infrastructure currently going on, it is a pity the opportunity is not being taken to do fibre-optics whilst the roads are already being dug up. My own street was due for f/o but it never happened, and Virgin failed to take the opportunity to put it in when they could have done it on the cheap while the water and gas mains were being renewed, so why should taxpayers fork out to cover for their incompetence?