Skip Navigation

Could new broadband levy for final 5% replace BBC licence fee
Friday 24 July 2015 10:19:13 by Andrew Ferguson

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.


Posted by MaryHinge about 1 year ago
I'm well served where I live but support some sort of levy to push SFBB to the remaining 5%. It's such an important service nowadays something needs to be done to help out the have-nots.
Posted by Llety about 1 year ago
The most significant economic problem the UK has is poor productivity [, ]. There is no shortage of money at local countil level for projects with a grand opening [a local example ] that make marginal economic contribution at best. Descent BB to all is ket for productivity improvement.
Posted by TheEulerID about 1 year ago
I'm personally fully in favour of an explicit levy against all ISP fixed line connections to fund expensive to reach areas. The broadband industry ought to be self-funding. Given that Ofcom's favoured market regulatory stance is minimises costs in a given area, there will not be excessive profits for implicit cross-subidisation.
As such, an explicit levy makes sense. £1 per month per connection would raise £250m a year.
Posted by TheEulerID about 1 year ago
I should add, that unlike Andrew, I don't favour this being done from general taxation. Successful, high-growth industries like broadband don't warrant subsidies from general taxation. The issue is one of market structure, and as such, the funds ought to be raised from within the industry.

As for the old Labour Party policy of a charge per voice line, that is surely loopy (pun intended). It's for broadband; the cross-subsidy ought therefore to be against broadband connections.
Posted by Somerset about 1 year ago
@TheEuler - £250m/yr for the 1m in the 5%. £1000 per connection over 4 years. Enough?
Posted by Llety about 1 year ago
sorry for the typo's

key -> key
countil -> council

done in a hurry before my connection tripped out again, its raining.
Posted by zhango about 1 year ago
If you google uk government waste you will read that billions of pounds are needlessly wasted every year by incompetent government depts. If this issue was tackled then the money for superfast BB would be available.
Posted by chilting about 1 year ago
Maybe the treasury is looking at alternative ways of funding the final 5% because of problems funding solutions such as fixed wireless via BDUK, due to EU regulations.
Posted by csimon about 1 year ago
Comms infrastructure is a fundamental part of how the country works, of course it should be funded by everyone through general taxation and not through cherry-picking for profit. The market has failed in bringing choice to the customer because unless the infrastructure is ther in the first place there is no choice for the customer. Once it's there then it can be left to the market to provide the choice and companies can fight and compete with each other on price and service.
Posted by csimon about 1 year ago
@zhango: "If this issue was tackled then the money for superfast BB would be available."

The same could be said of Openreach and other providers. If they were less wasteful and more efficient so that they had the money to do it then there wouldn't have been any need for the government to step in.
Posted by camieabz about 1 year ago
If we're to have a USO, we require all premises supplied.

This would be a levy on many things (information, democracy, shopping - don't we pay VAT on the shopping, and VAT on the connection already?), and I don't believe the government will end it once the goals are achieved.

However, with a tight-fisted, demanding customer base, and narrow profits, and the wholesalers pleading poverty, where else will the money come from?

Google, Starbucks, Amazon, Ebay, Vodafone, British American Tobacco, Tate & Lyle, Vedanta and NPower.

There's about £1.5Bn per year in that lot alone.
Posted by ValueforMoney about 1 year ago
The issue is not funding, apart from evidence of BT's capital contribution at present but resource. BT's plan is to resource 200 cabinets at week. The billing looks to be £7m subsidy a week(£90+m a quarter) in state aid for what looks to be £5m worth of effort (See NAO total average costs).

The existing budget of £1.7bn + BT capital of £353m should permit effort of £8.5m a week. The priority ought to be a resource plan before more momey is requested.
Posted by Michael_Chare about 1 year ago
I would suggest that the government should encourage parish councils and the likes of Talk Talk, Sky, Virgin, Openreach and Gigaclear themselves to run Gigaclear type projects where enough people are encouraged to sign up to make local projects viable.
Posted by andrew (Favicon staff member) about 1 year ago
@valueformoney based on general responses from Ofcom and Government it is looking unlikely that BT is in the running for final 5% projects. So BT resource levels seem irrelevant.
Posted by TheEulerID about 1 year ago

This would still count as state assistance, and as such, will be subject to exactly the same rules. What might get relaxed a little is where the intervention areas might be. Note that the "voucher scheme" was invented to circumvent some of those restrictions, but it isn't much use for dealing with infrastructure issues.
Posted by ValueforMoney about 1 year ago
@andrew That sounds peculiar, so once BT has done its 30,000 cabs, that is it? No roll over of funds. Current telephony USO holder hands back the claw-back and fails to take public funds to take fibre further refreshing its infrastructure in the most difficult areas.
That's too weird.
Posted by chilting about 1 year ago
Maybe rural connection vouchers would be the answer.
They could be used to fun a connection to an existing wireless network to get around EU regulations in the same way as the current scheme.
Their presence would encourage wireless operators to invest in new commercial networks.
Posted by andrew (Favicon staff member) about 1 year ago
@valueformoney I recommend a watch of the recent Ofcom boss video we covered.

Already with phase 2 contracts, BT is not winning them all.

People have campaigned long and hard for competition in who gets the funding and its happening.
Posted by jrawle about 1 year ago
Why don't we also introduce new taxes so everyone in the UK can live near: a manline railway station, a motorway junction, a large supermarket, a multiplex cinema, a swimming pool... Why does everyone need "superfast" broadband so that they can stream video? As long as they can access government services it's OK. If they want it for leisure/entertainment purposes they should move somewhere else.
Posted by ValueforMoney about 1 year ago
@andrew listened to the tape.

We should not mistake a few crumbs off the table, for what needs to considered national infrastructure for data transport.

We should not lose sight of might £1bn left in a BDUK investment fund when BT is finished grazing.
Posted by Llety about 1 year ago
@jrawle You are right about leisure/entertainment purposes. As long as people can access appropraite services around health, education, tax, etc, kids can do the homework et al. and those who need to can work from home are able to, then thats all that is needed.

Give us a reliable 4Mb at < 100ms latency and I am sure most of us rural folks will shut the **** up.

Still think BT should be on the hook for reliable 4MB for the whole nation.
Posted by ValueforMoney about 1 year ago
@jrawle if the adequate level of transparency existed we would find that it much cheaper than originally estimated in 2008, just over half.
So for what should in most cases be £70 (FTTC)-£1,000 a premise you can whole areas viable connectivity wise so can work from home 2/3 days a week.
Connectivity is different because it is so cheap to overlay fibres on existing structures.
Posted by chilting about 1 year ago
As you say it is impossible to work out how much Openreach are actually spending. The condition of the existing infrastructure must have a major impact on the deployment costs. Has BDUK been charged for all the duct clearing or does that come out of BT's maintenance budget?
Posted by Blackmamba about 1 year ago
Hi Chi and VFM.
You can see from the works orders ( see Elgin ) if the duct work is charged to BDUK plus the traffic lights if required also washers it is all charged to the number it has BDUK in it , as the SCC is holding the BT Money the work is paid as a % charge.
Posted by Somerset about 1 year ago
@NGA - 'it is so cheap to overlay fibres on existing structures'.

Details please with peer review.
Posted by ValueforMoney about 1 year ago
@Somerset I do not need cut and paste Morrisons rates, or Carillion/Telent rates, the NAO work is sufficient.
The issue is not money for now, it is resource and a willingness to do more.
Posted by WWWombat about 1 year ago
Any unspent money from BDUK phases 2 and 3 go back to the councils, for them to choose how to spend.

And as pointed out, it seems less likely that BT will be the recipient for phase 3, and some of phase 2.

Excess funds from there will just reduce the levy needed for phase 3.

Where would BT's resources go if not on the final 5%? Simple - deploying G.Fast commercially.
Posted by WWWombat about 1 year ago
Ah, the old "if transparent, it will be cheaper" chestnut.

You realise that you not only accuse BT of fraud with that statement, but also accuse the LA and BDUK auditors of somewhere between incompetence, malfeasance and fraud too.
Posted by WWWombat about 1 year ago
On balance, I'm OK with the idea of a levy, but I'd want it time- and function-limited, with a definitive pre-statement of what the aims are ... and I'd want to see a "nobody gets left behind" charter.

Beyond just the final 5%, we need to ensure that all operators then stick to the new level of USC.
We probably then need some form of independent adjudication to force network operators to really fix their network when speed loss occurs below this. No more apologies without a plan of action.
Posted by Fellwalker about 1 year ago
@camieabz exactly. Why does broadband warrant a separate tax? What is next - a levy on short to fix the pavements? Get the avoiders to pay the tax that is due and most of the funding problems go away.
Posted by Blackmamba about 1 year ago
Hi Broadband Watchers.
No more handout and state aid let the customer pay for the service required in this fixed open market.
Posted by TheEulerID about 1 year ago

As you are probably aware, Ofcom strictly regulate the pricing of MPF and LLU products. It is strictly cost based (plus the ROI of course), and Openreach are required to minimise costs. In real terms wholesale pricing is being reduced.

If you think that Ofcome would countenance the huge increase in maintenance costs that would be incurred in order to pre-emptively clear all ducts on a "just in case" basis, then you are living in a dreamland. Ofcom want to minimise pricing, and that doesn't include pre-emptive duct clearing. Some ducts haven't been accessed in 50 years.
Posted by Michael_Chare about 1 year ago
@Blackmamba. The challenge is to persuade someone (investors) to install a fast network which the customers can then pay to use. If the investors don't think they can get a good return the potential customers get nothing.
Posted by chilting about 1 year ago
Yes, I understand.
Presumably more blocked ducts will be encountered the further you go from the exchange because they are less likely to have needed clearing.
Given all the variables estimating the cost of upgrading the final 5% by fixed wired broadband
alone would clearly be impossible.
Posted by Blackmamba about 1 year ago
Hi Michael.
The investors are installing fast networks but the customers are not interested in the system see low take rate on new FTTC/P this could be due to the ISP ,s not advising their customer. I have just received an Email from Copdock area and found that a large area have not been told SFB is available this is going on through out the country. I think BT will invest in the network it will just only take time to clear the backlog.
Posted by Blackmamba about 1 year ago
Hi Chi.
This 5% will be costed on each Cab distribution and may be served even of a differant Cab with fibre via UG or overhead there are many option on each enclave so would it be more cost effective to provide fixed wireless on some exchange areas.
Posted by TheEulerID about 1 year ago

As the network branches out then there is, of course, more and more mileage of ducting. However, it's likely a high proportion in rural areas will be overhead, which doesn't present the same issue.

I'm sure the urban areas are rather different. There's probably a lot more activity in adding new cable and fibre for private circuits. It's the stuff out in the countryside that probably doesn't get accessed for several decades at a time. Also, a lot of the old ducting is going to be clay piping.
Posted by chilting about 1 year ago
That's really bad news in our sunken Sussex lanes. They are tree lined, no overhead, and they flood in winter. Its taken Openreach 12 months and counting to install one new fibre cabinet in Amberley. That includes 2km of replacement ducting.
Posted by kijoma about 1 year ago
This is the cabinet at Houghton @Chilting? , yes they closed the road there for a long time to dig in the new fibre. they managed to break the copper lines in the process, cutting off phone lines for many for some time as well. Fortunately for some it had zero effect on then as they use VoIP and the 10 year incumbent fixed Wireless service available there. This cabinet is over 2km from some of the lines it feeds and over 1km for the majority of them.
Posted by chilting about 1 year ago
They installed the fibre cabinet at Houghton last summer. The only trouble is this cabinet is 3km from Amberley so it is a bit of a white elephant only serving about 25 residents. Now they are extending the fibre network and installing an extra fibre cabinet in Amberley village but the line is so long that some residents will still loose out.
Posted by Mr_Fluffy about 1 year ago
My personal view is that public infrastructure and services should come out of general taxation, including those for the smallest croft, bothie or hovel!

(There's even a good case for free public transport if it gets unnecessary vehicles off the roads and out of easily congested areas -- the city fathers of a town in America showed that was economically viable a few years back! I don't know whether local politics has reversed that since I saw the reference)
Posted by Blackmamba about 1 year ago
Hi Chil.
If you look at the speeds on Thinkbroadband Map on Cab Houghton (25) no results showing on FTTC but if you look on Amberley Cab 5 speeds showing Kijoma so compertion when the new Cab is fitted with fixed wireless. In my thinking Goverment money will not be used on this new Cab but it may have been on the Haughton Cab. This area is covered by Bury Exchange code 0179883.
Posted by chilting about 1 year ago
It is defiantly part of the West Sussex BDUK roll out.
Posted by Blackmamba about 1 year ago
Hi Chi.
I have checked on Elgin see trafic lights works order and it looks in the numbers BDUK is showing for the fibre cable run. When the 240v power is provided FTTC Cab 5 check on the works order that may give an indication. I do not know if EU regs covers fixed wireless on the use of Goverment money over an area. Kijoma may be able to help over this 5% window. I do not think BT/Openreach would break the contract .
Posted by AspieMum about 1 year ago
One thing you can guarantee is very rural and hard to reach areas will miss out if its just left to market forces. There's not the profit or economic viability in the additional expense of upgrading their connections. You need some sort of levy & to make it a requirement or it won't happen
Posted by chilting about 1 year ago
Not necessarily. Blaze Wireless have just announced plans for a commercial network in West Sussex and there are plenty of other examples of commercial fixed wireless networks around the country. Small companies can easily enter this market and it is likely many more will as the gaps in FTTC coverage become more apparent.
Posted by Blackmamba about 1 year ago
Hi Chi
If the commercial wireless networks do not get a strong footing in this 5% window it will be closed by G/fast and fibre to the home over the next 18 months this could be the cenario from Sharon White at her meeting. Would it be possible for you to order a system as your post code is 2kmrs from your FTTC and I think it covers a few customers that are unable to access fibre. Good hunting.
Posted by meerman about 1 year ago
Am I confused, or is this proposing the BBC license fee might come from a broadband tax? That seems so wrong, since iPlayer requires that I send them a request to view something, and they respond. This means they have agency to refuse my request, unlike in broadcast television where the BBC have no agency, and so a one-size-fits all levy on all TVs makes some sense.

In the internet era, we should be able to opt in or out, the same way I opt-in to using Netflix or Sky.
Posted by andrew (Favicon staff member) about 1 year ago
Like other taxes - you start a new one at a low figure and gradually creep it up while reducing the other.

Taxes also have a history of morphing into something they were not originally intended to be.

So yes, believe that in time the TV Licence will vanish and it will become a tax on every Internet connection in the UK.
You must be logged in to post comments. Click here to login.