The truth about the 50p per month broadband tax

11th Feb 2010 | 14:15

The truth about the 50p per month broadband tax

The new charge is not about providing broadband for all

Those who won't benefit from the broadband tax

Tomorrow (Friday 12 February) brings to a close the first public consultation on the introduction of the new 50p levy for all telephone lines in the UK.

Introduced in the Pre-Budget Report in November, this "Landline Duty" will be enforced from 1 October 2010. Tomorrow's deadline is for commentary on the administration of the new tax. A second consultation, drawn up by the Department for Business, Innovation and Skills (BIS), closes on 1 April and will decide how it's spent.

It's a good time, then, for TechRadar to look into exactly what this new charge is designed to achieve in terms of improving access to the broadband network, and who gets what kind of service now.

Graham Wayne retired from his position as Chief Information Officer at software publisher Mastertronic Group about five years ago to develop a career writing. Since he moved to the small village of Hatherleigh in Devon, he's finished three books and runs a small IT consultancy to supplement his income.

"Ironically, I've got the worst broadband service out of any of my clients," he laughs. "On average, I get about 800Kbps download. It gets a bit better than that at times, but it can be very flaky and drop to less than 100Kbps too."

Wayne believes that his patchy internet service disadvantages him in two ways. First off, he says, is the issue of why should he pay the same amount for an unreliable, slow broadband service as someone just a few miles away that routinely connects at over 7mbps.

More important, though, is the impact it has on his business."Essentially, I have to organise my business around my service, rather than the service complementing my business," he explains. "It costs me money in the sense that every job I do can take me an extra two hours to download updates and so on for them."

Rural areas need broadband

There's plenty of justification for using public funds to improve access to broadband in rural areas.

"All the Post Offices are closing and they're encouraging you to do things like tax your car and apply for a TV licence online," says Rob Beadle, a part time teacher and IT consultant from Trevothan on the Lizard Peninsula in Cornwall.

"There's the money you can save, too: BT will give you a discount if you go for paperless billing, and a lot of my customers have got children and grandchildren all over the world and use Skype and online video to stay in touch. For the majority of people now broadband is starting to be a way of life. You can save more than you spend on broadband just by shopping online for things like utilities and holidays."

Beadle and Wayne both say that all of their customers that want broadband can now get it. Rather it's slow speeds and continuity of service which are the issue. BT reckons that around 15% of households can only connect at less than 2Mbps, and around 160,000 homes have no access at all via the Openreach network.

Broadband tax won't help them

What you may not realise is that the 50p a month Landline Duty is not being raised in order to help people like Wayne, Beadle and their clients.

In last year's Digital Britain White Paper, most of which is currently undergoing parliamentary scrutiny as the Digital Economy Bill, there were two separate proposals which have become more or less conflated in the public mind.

The first is the issue of connection speed. Digital Britain introduced a pledge for a Universal Service Commitment (USC), which will guarantee availability of 2Mbps broadband to 99% of the population by 2012. This is has been costed at £200m, and is being paid for by surpluses from the Digital Switchover fund.

The USC will likely be achieved by by using the existing copper network in the most isolated areas, and technologies like Openreach's new Broadband Enabling Technology (BET).

"Initial trials [of BET] in Inverness and Dingwall, Scotland have been very successful," a BT spokespereson told TechRadar. "With lines of between 7km and 12km running stable 1Mbps services. Where a second copper line is available, lines can be bonded together to provide a 2Mbps service."

What the tax will be used for

Funds from the Landline Duty, on the other hand, are earmarked specifically for the Next Generation Final Third project. It will raise over £1billion over the next seven years to ensure speeds "considerably higher speed than available currently" are available to 90% of the population by 2017.

Though the current consulation documents talk about "synergies" between the two undertakings, the stated aim of the Final Third project would still leave almost as many people on, as far as anyone knows that far into the future, what will be a sub-standard connection as there are today.

The current proposals favour an "inside-out" methodology - which means funding the upgrade of exchanges that are most likely to benefit commercially from faster than 8Mbps speeds today. Andrew Heaney, Director of Strategy and Regulation at TalkTalk //www.talktalk.co.uk//, believes that the subsidy is premature because the market hasn't had chance to work in these areas today.

"The Unversal Service Commitment is focussed on areas where the market hasn't delivered," Heaney says. "The cost per household is around £100 and the benefit is to take households from half a meg to two or more. That's good value for money. This new proposal is for a far bigger sum of money being spent on something that was going to be done anyway, and is going to take speeds from the average of 3-4Mbps to, say, 40Mbps. Is there really public value in doing that?"

To early to intervene?

The government's own documents would seem to support this, noting that it's taken just over a year for Virgin to reach 50% of the population with 50Mbps broadband, and BT will only take two years to extend its next generation access to 40% of households.

Even if, as Ofcom suggests, the market will top out at between 60-70 percent coverage, there's little evidence to show demand for faster than ADSL2+ access yet: in famously well connected Denmark the number of 50Mbps+ subscribers actually fell by 50% last year, because there are no services which demand that kind of access in the home yet.

A spokesperson for BIS highlighted three areas - Telemedicine, cloud computing and teleworking - which will be enabled by superfast broadband.

"Telemedicine provides real-time interaction between doctor and patient so consultation and even examinations can be undertaken online," they said. "This brings huge benefits particularly for the elderly and those who live in rural communities."

Appointments by webcam

North Bristol NHS Trust, however, is already doing exactly this by shipping out webcams to people in Cornwall in order to reduce the amount of commuting for appointments oncology and long term patients have to endure.

The online consultations work well over ordinary broadband, although speeds of 10Mbps or more are needed for high definition conferences and information sharing between satellite surgeries and the new superhospital in Bristol.

BT told us that 24Mbps via ADSL2+ "Is more than adequate to support today's bandwidth hungry applications".

"Does superfast broadband transform teleworking from being not possible to possible?" asks TalkTalk's Heaney. "No. How about education? These aren't high definition streaming services that are being introduced, they work perfectly well over 1-2Mbps."

Fifty pence a month, or six pounds a year, may not sound like a lot of money, but even Rob Beadle can see problems for those on low incomes.

"I think to myself - there's my mother in her old age, never going to have broadband and she can't really afford another 50p on her telephone bill, why should she pay for everyone else?"

Andrew Heaney claims the tax is "regressive" and take-up of newly available superfast services will likely be by those who could afford alternatives.

"Who are going to be the people that take up superfast broadband services in rural areas?" he says, "Politicians with second homes and relatively rich people in those areas. It's worse than regressive. It's robbing the poor to pay the rich. It's appalling."

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Liked this? Then check out Digital Britain: 7 things you need to know

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