Conservatives: "100Mbps by 2017" and "break up BT monopoly'
Sunday 31 January 2010 13:12:25 by Andrew Ferguson

This morning, Shadow Chancellor George Osborne has promised that a Conservative government would deliver 100Mbps broadband services to the 'majority' of homes by 2017. In an interview for the Andrew Marr show, he also suggested that where the private sector was unable to deliver a solution, such as in some rural areas, the BBC licence fee might be used to fund this.

The suggestion is that the BBC continues to set aside the 3.5% of the licence fee that is currently being used to fund the digital switchover but for this money to be diverted to fund broadband expansion. Exactly what constitutes a 'majority' of UK homes having access to 100Mbps by 2017 is unclear, so we hope this is clarified if it forms part of an election manifesto.

"In the 19th century we built the railways. In the 20th century we built the motorways. In the 21st century, let's build the super-fast broadband network that will create hundreds of thousands of jobs for Britain."

George Osborne, Shadow Chancellor

The current government has promised a Universal Service Commitment (USC) of 2Mbps by 2012 and has also planned a 50p/month levy (the 'broadband tax') which will be used to fund 'next generation broadband' for areas where the market is unlikely to deliver. This levy is expected to raise between £1-1.5bn by 2017 to pay for the 'final third' project to connect the most rural of areas resulting in 90% next-generation broadband coverage. It is not quite clear exactly what 'next generation' means in this context, however we expect this is referring to services in the 25Mbps+ range.

Mr Osborne goes on to compare the Labour government's 2Mbps USC with the promises by South Korea for 1Gbps, although he did not expand on the Conservative policy for delivering basic broadband services in a shorter timescale which may be of concern to those who can't get broadband at the moment. He also proposes the break up of BT to enable LLU operators and cable operator Virgin Media to deliver better services:

"If there are some parts of the country where the market can't get to; because I think the best way to deliver this is by breaking up the British Telecom monopoly at the moment which holds back companies like Carphone Warehouse or Virgin. If we find the market can't do that, then use the BBC licence fee, the digital switchover money in the licence fee, to get broadband out to the rest of the country, but let's see first of all if we can have the market delivering that super-fast broadband."

George Osborne, Shadow Chancellor

The licence fee is currently £142.50 per year, so 3.5% would amount to about £5/year per household. This amount is not too dissimilar to the £6/year levy (50 pence per month for every phone line; although we note that businesses would also be caught in the levy being planned by the government) particularly after factoring in any increases in the licence fee. With around 25 million TV licences in the UK this would raise between £750m and £1bn depending on how quickly it could be implemented and possible rises in the licence fee, perhaps slightly short of the estimates the copper landline levy would be expected to bring in. We are therefore primarily seeing a shift from one type of tax to another.