Opinion

Election 2010: Rural broadband needs urgent attention after 50p tax is axed

The main political parties have all pronounced on how superfast broadband will contribute to the long-term health and welfare of the nation, but so far have not offered much precision (with the distinguished exception of "Digital Britain"), nor any guarantees, on how universal access to broadband will be funded, writes David Harrington, regulatory affairs leader for the Communications Management Association.

The news that the 50p broadband tax has been horse-traded away is all over the news, with triumphalist noises coming from the Conservatives. However, amid the furore it is pretty clear that nobody is asking serious questions along the lines of "where do we go from here?". To add to the confusion, it is by no means clear who is (was) offering what, and from where.

It is to be hoped that the parties will recognise that the collapse of the 50p tax proposal will put our embryo broadband policy back in the womb until after the election. Then, if Labour is returned to power, we will have a "superaffirmative" procedure (whereby leftover legislation is subject to 60 days' further scrutiny) in the next parliament (commencing mid-May) that is likely to see the 50p tax reintroduced as an afterthought to the Finance Bill. If the Conservatives win, then presumably the 50p tax is finally dead and topslicing of the BBC licence fee will take its place.

The following assesses what is left on the table.

Labour

The government proposal to fund rural broadband arose from Lord Carter's Digital Britain report. The report posited a two-stage approach to broadband:

1. Universal broadband commitment

"the government will pursue universal service in broadband, at a speed of 2Mbps, by no later than 2012. The government will consult with the BBC Trust on how the emerging underspend from the Digital Switchover Help Scheme can be drawn on to fund universal service and take-up. If necessary, the cost would also be met through additional funding mechanisms, as set out in the Digital Britain interim report Discussions are underwayabout the practicalities and detailed timing of the release of the Digital Switchover Help Scheme underspend In addition, there will be a contribution from the BIS-administered Strategic Investment Fund, announced in Budget 2009. The contribution from the Help Scheme underspend is time-limited, in that it will only be available until the end of the switchover programme in 2012."

2. The next-generation fund

"there is no obvious means whereby the market, unaided, will serve the final third of the population. We therefore propose a final third project to deliver at least 90% coverage of next-generation broadband for homes and businesses by 2017 To generate the substantial funds needed to support such an undertaking, the government intends to propose a small general supplement on all fixed copper lines (that is, residential copper lines, the equivalent business analogue and ISDN2 lines and cable telephony lines) from 2010 for a next-generation funda supplement of 50p per month can be expected to raise £150m-£175m a year for the fund."

In a speech on 22 March 2010 the Prime Minister said that proposals for online delivery of government services "depend on reaching 100%" coverage of next-generation broadband by 2020 and he expects to "make Britain the leading superfast broadband digital power creating 100% access to every home". This suggested that the budget would have to include additional funding. It did not.

Conservatives

The Conservatives "broadly support" the concept of a universal commitment and a final third project. Consequently, they have two proposals in play:

1. Broad support for the Labour government's proposal to use the underspend from the Digital Switchover Help Scheme to fund "universal commitment". The scheme was funded at £603m, but is now forecast to yield a significant underspend. This is therefore a one-off windfall that will come to a phased end in 2012.

Note that Digital Britain makes it clear that the total arising from the underspend plus the contribution from the Strategic Investment Fund amounts to £200m, implying that the forecast underspend is somewhat less.

The Conservatives' approach is consistent with their strong opposition to the government's Independently Funded News Consortia (IFNC) scheme, which might have used the underspend to help provide non-BBC TV news to the Regions. The government admitted during the bill hearings in the Lords that it had not finally identified a source of funding. However, the INFC scheme has joined the 50p tax in the parliamentary dustbin, so the point is academic (for the moment).

2. In addition, the Conservatives propose a "top-slicing" of 3.5% of the £3.3bn licence fee. This is an annual subvention and equates to £210m per annum, creating, over five years, a "digital fund" of over £1bn to support roll-out of 100Mbps to the "majority of homes" by 2017 as the answer to the problem of serving the final third. In other words, rather more than the 50p tax would have yielded annually and starting in 2012, when the current BBC licence "settlement period" is due to end and a new one begin. This funding would then be used as loans or on a "matched funding" basis to support investment in high-speed broadband in difficult to serve areas.

In essence, the Conservatives favour a solution biased towards private investment. They accept that some public funding will be necessary - via the underspend and Strategic Investment Fund for the universal commitment and via the licence fee in the case of the final third.

LibDems

The Liberal Democrats also support Labour's plans to deliver 2Mbps by 2012, including using the digital switchover surplus to fund this. A key difference is that they believe that the delivery of the universal broadband commitment should be combined with the project for roll-out of next-generation broadband, so those who currently cannot get broadband would be among the first to get next-generation broadband. They also want to see the "vast majority" of the country able to access 40Mbps+ speeds by 2017, and that immediate intervention and targeted funding is necessary.

The LibDems oppose the Conservative policy of top-slicing the BBC licence fee and support Labour's 50p tax for funding the final third.

Summary

On balance it seems that the universal broadband commitment, not having suffered during the horse-trading over the Digital Economy Act and enjoying support from all parties, will be pushed ahead with only a slight delay caused by the election process.

Given the over-riding priority awarded by all parties to rescuing the economy it is probable that little progress will be made on funding the final third until the autumn. The delay is bound to affect the attitude taken to broadband by investment markets, although to what extent remains to be seen.

Damian Reece, writing in the Daily Telegraph on 8 April, was wrong to claim "there's no hurry". BT currently has its hands full with its FTTC programme (some 80,000 homes connected per week, or 10 million by mid-2012). If the final third is to be addressed by non-BT providers "in" 2012, they will need assurances and clarity of detail now, not in two years' time.

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This was first published in April 2010

 

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