The announcement from business secretary Peter Mandelson indicates a shift in government thinking. Originally, all the money from the Next Generation fund was earmarked for boosting speed in the networks above 2Mbps. He is now saying some of the money will be available to give 2Mbps access to rural and hard-to-reach communities.
Mandelson said private investment is likely to supply only 70% of the population with "super-fast broadband". A study by Vtesse Networks showed that up to 25% of the population would never get 2Mbps broadband without government help.
"Already the market is delivering superfast internet speeds of 50Mbps to half the country, but we cannot be certain that it will reach the communities that are not currently served, which is why we are putting in an extra £1bn to support the market," he said.
Responding to news of the consultation, Vtesse CEO Aidan Paul said, "We want it all." Vtesse and Virgin Media are jointly trialling the delivery of video-quality broadband in remote areas.
According to industry regulator Ofcom, mobile phone use outstripped fixed-line use last year. The number of fixed-line phones has been in decline since 2003 and stands at 33.2 million, giving the government a potential income of £200m-a-year from the new tax.
The Conservative Party has vowed to scrap the levy if it wins the general election.