Skip Navigation

50p broadband tax dropped, but prices will rise
Tuesday 22 June 2010 16:30:10 by John Hunt

Today's emergency budget from the Chancellor George Osborne has confirmed that the 50p broadband tax introduced by the labour government has been dropped. The government will instead look to private investment to boost rural broadband coverage with some funding being made available from the underspend on Digital Switchover which is expected to amount to between £250m and £300m. A further estimated £55 million of savings from Digital UK's communications budget was recently announced.

"I am happy to be able to abolish this new duty before it is even introduced. Instead, we will support private broadband investment, including to rural areas, in part with funding from the Digital Switchover under-spend within the TV Licence Fee."

George Osborne, UK Chancellor

Unfortunately, broadband prices are set to rise as VAT will increase to 20% from the 4th of January 2011. This will equate to a 25p a month rise for a £10 broadband connection or 50p a month for £20 (£3 or £6 a year respectively). Businesses will be forced to go through the costly process to adjust their prices and marketing again to take in to account the change for the 3rd consecutive year as the Labour government temporarily lowered VAT to 15% in December 2008, rising again in January 2010 back to 17.5%.


Posted by absent over 7 years ago
I would expect a lot of firms to take the opportunity to raise the prices to the next 49p or 99p, pretty much doubling the effect of the VAT rise.
Posted by GMAN99 over 7 years ago
And how will they be supporting private broadband investment then? Not with 250-300m that's for sure.
Posted by krazykizza over 7 years ago
how about some of this lovely borrowing of 150bn go to broadband? lets say... 10%?
Posted by gbswales over 7 years ago
back with the Tories believing that private industry gives a damn about small communities of a few hundred people seperated by miles of road from the nearest town. Private industry will simply play lip service and continue to cherry pick the big communities where profit can be made - am I alone in thinking the flat rate 50p tax to support areas that companies wont service was a great idea?
Posted by cyberdoyle over 7 years ago
the 50p phone levy was always a strawman, designed to focus the media on winding up the urban masses. The vat increase will bring in the same amount from broadband (and phone) users. It would never have paid for NGA in the final third anyway. Nor will the digital switchover money alone, it will need legislation to make it a viable proposition for private investors. Scrap the VOA tax. compulsory purchase existing rural assets. Make sure the other utilities and all councils collaborate and then we will see a real digitalbritain without it costing an arm and a leg.
Posted by Somerset over 7 years ago
cd - what 'rural assets' do you mean?
Posted by nmg196 over 7 years ago
Bit of a silly article - the VAT rise affects all products, not just broadband. Besides, many companies will simply adsorb the rises rather than actually changing their prices from £19.99 to £20.41 (etc)
Posted by CaptainHulaHoop over 7 years ago
compulsary purchase of existing rural assets, please elaborate

Posted by john (Favicon staff member) over 7 years ago
@nmg196: Perhaps. We'll see what happens I guess. Most adjusted in line with the VAT fall although some tweaked the numbers to round them a bit. Others will rejig their products so you can't compare like for like..
Posted by otester over 7 years ago
50p tax was another socialist idea.

Screw all you freeloading scumbags!
Posted by Dixinormous over 7 years ago
Says Mr TB a month freeloader.
Posted by KarlAustin over 7 years ago
Private industry has proved in the last few months that it can certainly pick up the ball and fill in the gaps - unless you've not been reading the news on here about the various projects that are running or are about to start, giving people FTTC before BT/VM take an interest. IMHO it's far better for communities to be more involved in these kind of projects - that way they get what they need, not what some big corp thinks they want.
Posted by Matchstick over 7 years ago
At present the last few months have proved that Private Industry can provide coverage of small geographical areas, but there is no evidence that this model is scalable to cover the large geographical areas that are required to provide universal next-gen broadband.
Posted by KarlAustin over 7 years ago
But these companies don't need to cover large areas do they? BT/Virgin are covering the larger areas, these smaller private companies are filling in the not-spots with the same technology as BT are deploying and that can be scaled to FTTH in the same way, one company doesn't need to cover the whole country with a one size fits all solution.
Posted by jumpmum over 7 years ago
Karl, BT/Virgin are covering Large populations small areas, smaller private companies have covered very small geographies and populations successfully, someone will need to cover the isolated houses, very large geographies, very small volumes. These are the areas that public money will be essential for. Individual houses that are km from villages/ towns. BT/Virgin do 1000s, small companies do 100s, who does the less than 10?
Posted by cyberdoyle over 7 years ago
soz for delay. By compulsory purchase I mean the infrastructure - poles ducts and wayleaves that currently connect the final third to the phone network. These assets should be claimed by government if the incumbent isn't going to upgrade them to give an internet service. they can then be used by private investors or communities to provide their own services through fibre. The main cost in delivery is the dig, so if the assets are already there fibre can be run over them. Sharing isn't likely to be an option as the costs will be too restrictive...
Posted by AndrueC over 7 years ago
@cyberdoyle. You /what/?

Are you seriously suggesting that the government should be allowed to seize the assets of private companies just because the companies have their own ideas about what to do with them?

BT will have sound and valid reasons for not providing FTTx to remote locations. There isn't some boardroom conspiracy to deprive 'straw sucking yokels' of high-speed internet connectivity.
Posted by AndrueC over 7 years ago
(cont'd)There is no legal nor moral justification for government seizure. As long as BT doesn't violate the terms of their license they are free to use or not use their assets as they see fit.

Government seizure should only be considered when public health is at risk or there is clear and irrefutable evidence of misuse or abuse.

Internet access (esp high speed) is not a matter of public health.

There is no abuse or misuse - just an inability to find a viable business model.
Posted by AndrueC over 7 years ago
(cont'd)How do you think other companies will react if not being able to find a business plan for something means they lose their most vital assets?

It's madness.

A government that seizes in that situation is also a government that will seize your house because you aren't using all the bedrooms or because it's painted the wrong colour.

Get real, please!
Posted by Dixinormous over 7 years ago
BT will soon be required to offer access to the poles and ducts and have stated an intention to do so. I'm sure companies will be clambering over one-another to supply fibre to the final third if it's so profitable.
Posted by GMAN99 over 7 years ago
@AndrueC :D :D :D

But yes totally true... its amazing some of things that get written on here. So CD with that wild slant on the world your saying if company XYZ has a massive plot of land doing nothing and the government want to use it to build homes on, yeeehaaa here comes the asset guzzling team to seize your assets. if your not going to build homes on it, we will take it off you and give it to a private firm who will build on the land.

Exactly the same thing and exactly why it won't happen. Even the government can't simply take things away from a private company... ridiculous.
Posted by GMAN99 over 7 years ago
Exactly Dixi, if open access does come about there's no excuse for other ISP's/private firms to get involved at all. I've no idea what the charge will be for use of poles and ducts but it will be nothing compared to someone digging new ducts. I predict they'll be little interest from other firms even if a much easier path is presented to them like this for the same reason bigger firms are not interested, because there's no return on investment in these smaller pockets of users.
Posted by lelboy over 7 years ago
What an inane, offensive comment from otester. Free speech on the forums? Yes, of course. Allowing malcontents to spout childish rants on a supposedly adult forum? Not for me, but I suppose all retards should have their say - equality and all that, don'tcha know.
Posted by lelboy over 7 years ago
What an inane, offensive comment from otester. Free speech on the forums? Yes, of course. Allowing malcontents to spout childish rants on a supposedly adult forum? Not for me, but I suppose all retards should have their say - equality and all that, don'tcha know.
You must be logged in to post comments. Click here to login.