Tax can make broadband available for all

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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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