The government is currently on track to deliver superfast broadband to 90% of the UK by the end of 2015. In its manifesto, the government pledged to extend this to 95% of the UK by the end of 2017. ‘Near universal superfast broadband’ has been promised for rural areas by the end of the current parliament in 2020. Superfast broadband refers to speeds of 24Mbps or more. However, the cost of delivering superfast broadband to the final 5% is estimated to cost £500 million.
Several satellite and wireless technologies are being tested to determine if they can bring superfast internet access to the most remote parts of the country. The two main funding options are currently said to be either raising funds through general taxation or a levy on the industry.
A significant proportion of the investment so far has come from the Digital Switchover Budget of the BBC TV Licence fee. Local authorities have also stepped in to match the commitments from central government. However, due to proposed cuts it is unlikely that more funding can be obtained from the BBC and ongoing austerity will, undoubtedly, hinder the ability of local authorities to commit more funding.
The Financial Times has reported that the preferred option is, a levy on broadband providers. Senior government officials have reportedly told the FT that ministers are considering shifting the cost of delivering superfast broadband for the final 5% to the industry. Raising the funds through general taxation is less likely since the Chancellor is seeking spending cuts without breaking any manifesto pledges. However, the Department for Culture, Media and Sport has not yet made a final decision about how the money will be raised.
Back in 2010, the Labour administration proposed a telephone line tax that would have seen a 50p per month levy on all connected telephone lines. This tax was designed to raise money to extend broadband coverage, but it was scrapped due to its lack of popularity. The proposed tax was widely opposed by ISPs, the general public and opposition politicians.
Internet service providers’ association (ISPA) has suggested an industry levy would ‘undermine’ the investment that providers are making to accelerate UK broadband speeds. It suggested that the government should instead ‘focus efforts on encouraging investment and competition’.
Broadband news site ThinkBroadband has suggested that it is highly likely that any industry levy will be passed onto consumers, who would see their monthly bills increase by around £1 if the levy was passed on in full. Andrew Ferguson from ThinkBroadband has further suggested that the £500 million pound figure to extend superfast broadband to the final 5% of the UK seems too small. He pondered whether the government is assuming that local authorities will match any funding, stating that ‘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.’
Ferguson went on to suggest that the government should raise the money through general taxation because those who stand to gain the most are the likes of government departments, who are reducing costs by moving business and public interactions online. He said that ‘departments like DEFFA, NHS and HMRC will see big savings once everyone has a fit for purpose connection.’
ISPA Secretary General, Nicholas Lansman, told ISPreview that ‘broadband is an enabling industry that underpins the wider economy, so there is a case to be made for public investment to help support rollout to the 5% where the benefits will be most transformative’
CEO of Ofcom, Sharon White, has reportedly hinted at support of the industry levy. In last week’s Strategic Review Document, she suggested that the option of a levy might be plausible. However, there are no specific mentions and what is said is somewhat vague.