No new broadband tax, money to be taken from the BBC
Wednesday 20 October 2010 14:51:04 by Andrew Ferguson

The Spending Review by Chancellor George Osborne has some news for broadband users, particularly those who are not likely to be in the two thirds of the country where next generation services are to appear in the coming years. Rather than a levy/tax as was proposed under the previous Labour Government (50p per month per landline), the BBC is to contribute to £530 million over the next four years towards projects.

We knew the £230m surplus from the Digital Switchover fund was destined for use to meet the Universal Service Commitment (USC) due in 2015. An additional £300m from the Television license fee will push this to the £530m. If this funding were to be bolstered with match funding by commercial operators, the £530m could make a serious dent in the final third issue, but it is more likely to be spent on various trials and funding projects where commercial operators have no desire to add their own funds.

Some areas of the UK should hopefully see some progress in terms of next generation broadband as four areas are mentioned today as being places for trials: Highlands & Islands, North Yorkshire, Cumbria and Herefordshire. Some of these areas have had money previously spent to roll-out first generation broadband and as such represent the danger of centrally administered trials and projects. This often ends up with projects meeting the target, but often very little effort is made to provide a future proof solution.

The BBC is facing a tough time, with the TV licence frozen for the next six years at £145.50, and it is now expected to fund S4C and the BBC World Service. It is possible that some of the £1.35 a month in the licence fee that is earmarked for digital TV and new technology may be used to fund the £530 million. Also the TV licence fee in its current form, is not actually required if you only view TV after it has been broadcast, which means if you only view catch-up content via the various TV players online, you do not need a licence. To maximise revenue the prediction is that this 'loophole' may be closed, and even viewing catch-up content will require a licence.

The 50p levy suggested by Labour had many critics, but it would have raised around £150m a year. The Government, by taking the money from an existing licence/tax, is effectively raising the same amount of money via a less visible route, which may bring criticism that it is a stealth tax.

The big question now, is what sort of services will be created with this funding. Any solution that does not attract the mainstream service providers onto it runs the risk of never being able to sustain itself commercially without year on year funding from sources like the BBC. If one works on Fibre to the Premises (FTTP) costing perhaps £1000 per property, then maybe half a million properties could be given a truly future looking connection. This is unlikely and it seems more probable that Fibre to the Cabinet (FTTC) will be used, with wireless networks being deployed in some areas. These would allow more properties to be covered for the same money, but run the real risk that in ten years time further upgrade work will be required.