The FT has apparently been told by senior figures in the government that ministers are considering a levy to raise some £500 million to complete the work on Superfast Britain and bring superfast broadband to the final 5% of the UK.
The levy suggested is described as an industry tax and as such does not appear to be an exact copy of the hugely unpopular 50p per telephone line tax proposed and dropped in 2010. A levy against the providers would be cheaper to collect but at the end of the day margins are thin on broadband with the volume of users driving the profit margins that do exist.
If a levy was brought into place, as with other levies in the last few centuries there is a good chance it will remain in place beyond the original aim and might then creep up and could very easily become a supplement to the BBC licence fee or maybe the eventual replacement, with the levy funding public service broadcasting in what ever form it exists in 5 to 10 years and further broadband upgrades for rural areas.
The £500 million figure suggested for resolving the final 5% actually looks far too small, the 5% is some 1.3 million households (and then you need to add all the businesses), so works out at around £380 of funding to get superfast broadband to these places. The recent Exmoor and Dartmoor phase 2 contract with Airband saw £4.6 of public money going towards 5,800 premises so a subsidy of £793 per premise, of course if the Treasury is assuming that local authorities will match fund we will get to that level of subsidy. The big question is where will local authorities find that sort of money when their budgets are severely stretched and austerity is still the message from Whitehall.
Looking at what size of levy is needed the old 50p system would raise around £140 million per year. We believe the £500m could be spread over a two year period, so you are looking at £10 per broadband connection a year, or put another way Sky would need to put a total of £100 million into the scheme, BT Retail £140 million, TalkTalk £80 million and Virgin Media £90 million and then there is the long tale of smaller providers. While we are talking about broadband providers, why stop there, why not tax Netflix, Amazon and Google for driving the demand for faster connections because of all the video streaming.
While easy to suggest this is just idle gossip from the Treasury or an attempt to sound out the response from industry before it becomes policy, it is worth remembering that Sharon White the new head of Ofcom worked for the Treasury previously and a levy in one form or another is on the table as part of the communications review.
The final 5% of premises which is largely rural, but will include some urban areas are those least likely to ever be commercially attractive to the large providers, so the chance of them ever seeing a return on the investment is minimal. The people who actually stand to gain the most are people like Government departments who are already reducing costs by moving public and business interaction to the online world.
Surely the Government should invest in the future via the general taxation system in the knowledge that if they properly fund broadband the benefits will mean that departments like DEFFA, NHS and HMRC will see big savings once everyone has a fit for purpose connection.