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The superfast broadband rollout so far has been funded in a number of ways: BDUK funding (partly from the BBC License fee pot), match-funding from local authorities and a number of Government-led schemes encouraging industry to tender for contracts to reach the 95% target. The “homes passed” numbers are increasing, but reaching the final 5% was always going to be tricky and expensive.

The Government has estimated that it will cost a further £500million to deliver superfast broadband to the last 5% and, due to the predominantly remote locations and diverse geography, standard fibre broadband is unlikely to be suitable. A number of trials are already under way to evaluate the most suitable technology to do the job (e.g. satellite, wireless). But £500 million is a lot of money to find, so where is it likely to come from?

Rumours are currently rife that the Government is planning to impose a ‘levy’ (read ‘tax’) on ISPs which is quite a significant u-turn on its previous pre-election stance in 2010 when the Conservatives categorically opposed a similar 50p tax by Labour on phone lines, describing it as an ‘archaic way of achieving investment’.

The details of the suggested proposals have not been disclosed yet so we don’t know how much the tax would be, or the details of who it would affect, but the previous tax suggestion was far from popular with customers and industry. As a regressive tax, it would have a disproportionate impact on lower-income households.

If they impose a tax – who will pay?

Let’s face it, if the Government does decide to impose a tax on ISPs, it’s highly likely that the additional cost will simply be passed on to the end customer in one way or another, so it’s likely we will see an increase in prices to cover the costs. However at this stage we have no idea which customers would be affected. For example, would it be based on phone lines again or broadband services? Consumer only or business too? Will it affect the major ISPs only or all providers? There are still a lot of unknowns at this stage but the initial response is far from favourable.

A key concern for many is the fact that, once imposed, such taxes often linger beyond their original purpose. For example, once the 5% target has been met and funding achieved, it’s unlikely the tax will simply be withdrawn, but if that is the case where will any additional money raised be used by Government and if it’s not related to further broadband or telecoms related investment is that really fair on the ISPs and their customers?

A further factor to consider is the Government’s hints (albeit not with any actual promises yet) on increasing the existing Universal Service Commitment to a 5Mbps Universal Service Obligation and the impact this would potentially have on the rollout. If that becomes the case, would the Government simply pass the buck to the incumbent providers to satisfy this last 5% requirement and fund it accordingly as part of their obligations? Is that fair? Or would that simply result in a lack of industry confidence in the Government and a reluctance to invest further?

With little in terms of detail emerging at the moment, this debate is mainly speculation but it raises a number of very interesting and some quite concerning questions for consideration. It’s inevitable the 5% must be reached but how? Using which technologies? From which providers? And at what cost and to whom? At this stage we simply don’t know the answers to those questions but we hope that industry will at least get their chance to contribute to the debate and argue their case against a levy. We agree with ISPA that the Government would be better off focusing on encouraging industry investment and competition.

Have your say!
How do you think the final 5% will be funded? Do you think a levy is likely? Do you think if left to their own devices industry would invest to achieve this goal or is Government intervention required? Let us know your thoughts by leaving us a comment below.

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