Opposition to the 50p per month levy, that was due to be paid on all connected telephone lines this Autumn, appears to have caused it to be scrapped in the rush to get legislation through the House of Commons prior to Parliament being dissolved next week.
The levy or tax as many prefer to call it, was intended to form the cornerstone of Labour's Next Generation Broadband project, raising around £1.5 billion between 2010 and 2017 which would extend broadband at speeds of 25Mbps and faster from around the expected 60% coverage to 90% coverage. The scrapping of the levy throws the plan into confusion, though of course there is nothing stopping a re-elected Labour Government from re-instating it.
The levy was not linked to the Universal Service Commitment (USC), which has around £200 million of funding available to it already, which is surplus from the digital switchover fund. The USC is meant to get 2Mbps broadband to virtually everyone by 2012. This task has support from the three main parties so is unlikely to change.
The reason for the dropping of the tax along with two other taxes in the Finance Bill was to ensure the bill would get passed prior to the breakup of Parliament. With the debates ongoing with regard to the Digital Economy Bill this means that clauses from the bill may still get dropped to squeeze the bill through at the last minute.
The position of the Conservatives and Liberal Democrats with regards to broadband is outlined in an earlier thinkbroadband news article. The Conservatives favour waiting until 2012 to make any firm decision, and they may at that point intervene with a view to encouraging further commercial roll-out to meet a '100Mbps to the majority' by 2017. The Liberal Democrats backed the 50p tax, but wanted to ensure it had appropriate exemptions for social tariffs etc and aim for 40Mbps to the vast majority by 2017.