New government must decide quickly how to pay for high-speed broadband

The news that the 50p-a-month landline tax has been scrapped was widely expected, given the limited amount of time between the levy being announced in the Budget and the dissolution of parliament, as well as the strong Conservative opposition to the measure, writes Sam Blackie, telecoms director, Deloitte.

The news that the 50p-a-month landline tax has been scrapped was widely expected, given the limited amount of time between the levy being announced in the Budget and the dissolution of parliament, as well as the strong Conservative opposition to the measure, writes Sam Blackie, telecoms director, Deloitte.

However, in the light of Britain's "digital standing" compared with countries like Japan, as well as the investment being committed in countries such as Australia, this is likely to remain an important issue on the UK's political and economic agenda.

Both Labour and the Conservatives have publicly supported the introduction of high-speed broadband networks. These are expensive to deploy, especially in rural areas. Indeed, international evidence suggests it will not be commercially viable to construct these networks in many parts of the country without some level of financial support from the government.

However, with disparate views between the political parties on the most effective way to implement next-generation networks, it is unclear what will happen to the policy after the General Election, especially if there is a hung parliament.

There are other issues too, such as how to manage the transition from existing to next-generation networks. Current regulations were designed to manage existing networks. Adjustments will be needed if operators are to have appropriate investment incentives, while ensuring that consumer interests and vibrant competition are maintained.

Despite this, there are ways to roll out high-speed broadband. Some countries allow operators to charge higher prices on all or some of their products to help fund the network investment. Although this appears relatively straightforward, it raises many practical challenges. For example, how much should prices rise, and how long should they stay? Will the rise apply to all products or only to some, such as the high-speed data connections required by businesses?

Another option would be to give money directly to operators to cover the costs of building a widespread network. This could be done through a 50p tax like the one ditched in the wash-up. Other options include general levies on operators, or private/public investment vehicles akin to those in Australia.

Regardless of how next-generation networks are delivered, the broadband issue is likely to receive considerable attention. The new government's decisions on how to finance broadband will affect both operators and consumers. Crucial to getting the required participation from the industry is the virtual certainty of a return on its investments.

But if these returns are to be met in a realistic period, the next government will have to decide its funding plan quickly.

This will ensure operators understand how much, if any, government funding is available, how it will be awarded, and the regulatory environment that will allow them to earn their returns.

This was last published in April 2010

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