Broadband tax – right direction, wrong track

Yesterday, the BIS Committee published a report querying the Government's planned 50p broadband tax on fixed phone lines to pay for increased broadband speeds.

Yesterday, the Business Innovation and Skills Committee published a report questioning the 50p broadband tax that the Government aims to place on fixed phone lines to pay for the increased broadband speeds outlined in the Digital Economy Bill.

The Committee called the tax regressive and Left Foot Forward has written about this previously. As stated in the committee’s report, the tax will hit the less well-off or the elderly, who are also the demographic least likely to use super-fast broadband.

According to the report, younger and more financially well-off users are these days increasingly using mobile phones rather than land-lines, which would not be affected by this tax.

Importantly, will this tax raise enough money? Current targets are 2mbps, which is paltry compared to the 100mbps targets set out by other countries. According to the report:

“The levy is expected to raise £1 billion over the course of seven years.”

Australia will be spending £20.9bn to fund their huge upgrade. Surely, it is in the best interests of the UK to pay more for far better infrastructure which will be significantly less costly in the long run? In a future economy, future thinking is vital.

The report quotes evidence from witnesses that suggest the Internet Service Providers (ISPs) should help pick up the tab. Ed Miliband and Ofgem have previously threatened similar action against power companies if they don’t commit to upgrading the electricity networks to plan for a carbon free economy – feasibly, the same could work here.

It is after all in the best interests of ISPs to have a wider audience as obviously that will lead to an improved marketplace. It makes sense then that they should put in since they will reap the profits. It is up to the Government to step in here.

On a far more technical point, as stated in a previous a Left Foot Forward article, currently, optic fibre is taxed but copper cable is not. If optical fibre wasn’t taxed, ISPs may be more willing to take up a significant proportion of the costs, allowing the government to have less opposition to forcing them to upgrade.

Another alternative is to simply add a tax to mobile phones and/or broadband users themselves, almost in a pay per use scenario which is obviously fairer that the 50p tax.

However, the Government is right. It is vitally necessary for the digital infrastructure to be improved to ensure Britain is able to keep up with other nations and be competitive in the ever changing digital market.

It has to be paid for, but are there better ways to pay for it?

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