Out-Law News 2 min. read

MPs slam planned phone levy, urge focus on cheaper, proven digital inclusion plans


The Government should drop its 50p per month tax on phone lines and put its plans to increase superfast broadband coverage on hold, MPs have said. The tax is regressive and unfocused, they said.

The Business, Innovation and Skills Committee of MPs has investigated some of the proposals of last summer's Digital Britain report, which the Government adopted as policy and is turning into concrete plans.

One of those plans is to greatly increase the coverage of 'next generation' superfast broadband networks. The Digital Britain report concluded that the market will only provide two thirds of the UK population with that connectivity and that Government should fund the provision of networks to the final third.

The Government plans to do this and plans to levy 50p on monthly phone bills for all fixed-line service in order to do it.

The Committee opposes both the tax and the prioritisation of next generation networks. It has said in a report that there is not clear demand for superfast broadband and that even if there were the tax is not the best way to pay for it.

"The Government’s proposals to intervene more widely in the Next Generation Access (NGA) markets are unwise at this stage," said the Committee's report. "Early Government intervention runs a significant risk of distorting the market and will not allow time for technological solutions to extend the market’s reach across the country."

"Furthermore, there is little evidence to suggest a pent-up demand for this enhanced service with consumers currently unwilling to pay the premium for such services," it said. "Government intervention at this stage should concentrate on changing policies to encourage investment in the NGA market. This could best be done through the tax and regulatory systems."

The Committee said that charging the flat levy was regressive, meaning that it took no account of people's income, and that it forced all users to pay for a service which only a small number would ever want to actually use.

"Such a levy would be both regressive and poorly targeted. It would have a much greater impact on the less well-off who will pay for an enhanced service which only a minority will enjoy," it said. "If public funds are required for Next Generation Access, they should be raised through general taxation, in the same way as for any other national infrastructure programme."

Executive director of strategy and regulation at phone and internet provider TalkTalk Andrew Heaney agreed in his evidence to the Committee.

"We know the people who take broadband today and the people who pay premium prices for the better broadband today are the richer ones," he said. "The reality of this tax is that everybody will pay for a relatively richer group in society to have what today is, frankly, not an essential service and probably a bit of a luxury. That seems unjust in today’s society."

The Committee said that neither the minister responsible for turning Digital Britain recommendations into policy, Stephen Timms, nor his department could definitively say if the money raised through the levy would be formally ring-fenced solely for use in building next generation networks. This, the Committee said, undermined the credibility of the tax.

The Committee said that the Government should spend more of its time and money on existing plans that would involve more people in digital society and the digital economy at far less cost than the next generation network plans.

"Greater attention and resources should be given to digital inclusion which delivers proven social and economic benefits to the individual and the cost saving benefits to the Government," it said. "However, funding for these important measures is dwarfed by the proposed budget for Next Generation Access. In times of great stringency in public expenditure, digital inclusion not Next Generation Access should be the priority for expenditure. The market can be helped to deliver greater levels of high speed access without significant increases in public expenditure."

The Committee backed the Government's plans to spend £200 million ensuring that everyone has access to 2MB per second broadband by 2012, though it did express concerns that the definition of 2MB per second broadband had not been pinned down by the Government.

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