MPs want clarity on broadband plans and to scrap 50p tax
Tuesday 23 February 2010 00:25:18 by John Hunt

The Business Innovation and Skills Committee has today published its report on broadband which evaluates the proposals being put forward by the government (largely within the Digital Britain report) to improve broadband access and speeds in the UK. Whilst strongly supporting the governments proposals to enhance the digital economy in the UK, it has a number of concerns about the way the government intend to do this.

Need for a full-time minister

The first criticism comes at the lack of a full time minister to push forward the UK's digital economy. The current arrangement sees Stephen Timms, Financial Secretary at the Treasury also acting as minister for Digital Britain. The committee, note that whilst Timms is very capable, they feel the post should warrant a full time minister, and at that, one who would be less conflicted. As his role as Financial Secretary, his duties involve raising tax revenue, whilst he would be looking to spend this as minister for Digital Britain. The committee recommend appointing a permanent minister to this post at the earliest opportunity, and one who is not encumbered by potential conflicts of interest.

Clarity for definition of '2Mbps' Universal Service Commitment

The committee are keen to support the universal service commitment (USC) put forward in the Digital Britain report, and they see the 2Mbps as a fair representation of a useful minimum speed that would benefit society by 2012. They hold concern over the definition of this 2Mbps, which through evidence given to the committee, appeared to be undefined in a way that would allow technology to be deployed to be able to meet this. The committee suggest that the Government and the Network Design and Procurement Group (NDPG) (the people responsible for delivering the USC) define the 2Mbps as a matter of urgency. They believe that a 2Mbps USC should deliver 2Mbps to all users under "normal circumstances" all the time. One would expect this to mean that bar problems, users should receive 2Mbps (not "up-to" 2Mbps).

Lack of a 'killer app' to drive demand for next generation broadband

Concern is raised over the governments proposals to help fund Next Generation Access (NGA) which aims to delivery faster broadband services to 90% of the country by 2017. The committee are worried that there is no "killer app" (other than multiple high-definition television streams) that will mean that people need NGA. Placing public money, to fund a market which currently has low take up could prove an expensive investment into unneeded technology. The market may pre-empt government funding being available thus blocking or delaying private investment. The committee acknowledges that the market is unlikely to deliver NGA to the whole country, but feels the market should be left to take the lead and government intervention examined at a later date. Indeed one proposal is to allow competitor access to BT's ducts and this is something that BT are already evaluating.

Broadband Tax: "Regressive"

The last major point covered is the 50p levy put forward to raise money to fund NGA to the 'Final Third' of consumers. They believe this to be a regressive tax which will help a minority of users whilst taxing a large proportion, and therefore judge it to be unfair. The committee also suggest setting out in unambiguous terms how it should be used. They specifically do not support the 50p levy as a way of raising revenue, but instead think this should come out of general taxation. Indeed, they also believe that charging VAT on top of this tax is unfair.

Fibre Rates

Every metre of fibre optic cabling over public land is liable to a 'fibre tax', or non-domestic rates, presenting an increased cost to operators trying to increase capacity and redundancy nationwide. The committee believes that a relaxation or temporary removal of business rates on fibre would be helpful as a method to encourage the roll out of NGA infrastructure by the private sector which it believes would be more beneficial than funding from public sector. There is also some inequality at work as BT are charged under a different model to other fibre operators and the committee suggest that this should be rectified.

"Government intervention at this stage should concentrate on changing policies to encourage investment in the NGA market. Perhaps the best example of this is the business rating system which currently discriminates in favour of BT and against its competitors. We believe that the Government should consider a reduction, or even a temporary removal, of business rates on fibre optic cable. This would be a more effective use of limited public sector funds than direct financial intervention."

Peter Luff, Committee Chairman

So generally, the committee deem that a rethink is required in many areas proposed by the government within the Digital Britain report in relation to broadband. How this will be taken forward will be interesting to see.

Update 23/02/10 11:35:

In response to the above, we received the following statement from the Department for Business, Innovation and Skills (BIS):

"The Select Committee's report welcomes Government focus on building a world-class digital economy for the UK and efforts in improving access to faster broadband speeds. Next generation broadband is vital to the UK's growth and we want everyone to access the huge social, economic and health benefits it offers. Our analysis shows that without intervention, the market will only reach up to 70% of the country so it's vital we act now to ensure no area if left behind.

The 50p duty we have proposed is modest, fair and affordable and is the best way to drive further investment in our networks. We have always said those on social telephony tariffs will be exempt. The duty will generate some £1 billion investment in upgrading our digital infrastructure, which will particularly benefit rural areas.

We're currently consulting on the most effective way to deploy this investment with public and commercial benefits in mind, and will consider the Committee's report in our final response."

BIS Spokesperson

Update 23/02/10 15:50:

Vtesse Networks, the company recently in the Court of Appeal over fibre taxes has welcomed the report having given evidence to the committee. In particular they believe that its recommendation on fibre rates and access for competitors to BT's ducting and poles is very important:

"The Committee's stance on state investment in broadband must be applauded. The report clearly supports the role of private companies in building a truly Digital Britain. Vtesse has supported rural communities with trials to improve broadband in underserved areas and we will continue to engage with government on the best way to provide universal broadband access."

Aidan Paul, CEO, Vtesse Networks