Superfast broadband would hit 70% coverage with no funding, says Government

The Government is planning to introduce a controversial 50p per month extra tax on phone lines to pay for its policy of ensuring that next generation superfast broadband reaches 90% of households by 2017.

The Government's own report shows, though, that the disputed levy will result in a coverage increase of just 20% over what the markets would provide anyway.

MPs last week criticised the levy and said that the Government should not spend public money providing services that commercial markets would provide. The Business, Innovation and Skills (BIS) Committee produced a report on some of the recommendations of the Government's Digital Britain Report, including its superfast broadband plans.

"The Government’s proposals to intervene more widely in the Next Generation Access (NGA) markets are unwise at this stage," said the Committee's report. "Early Government intervention runs a significant risk of distorting the market and will not allow time for technological solutions to extend the market’s reach across the country."

"Furthermore, there is little evidence to suggest a pent-up demand for this enhanced service with consumers currently unwilling to pay the premium for such services," it said. "Government intervention at this stage should concentrate on changing policies to encourage investment in the NGA market. This could best be done through the tax and regulatory systems."

The Government has published research that it commissioned on its plans. The research, conducted by Analysys Mason Group, investigated the patterns of coverage if the Government proceeded with its plans and if it left it to the market to provide investment in networks.

It investigated the 'downside coverage' scenario, which is that in which the levy funding is not available or take-up of it is low.

"In the downside coverage case, roll-out predictions start with the same 45% UK coverage as the base case by the end of 2012, but reaches only 70% roll-out by 2017," it said. The Government's plan is to use levy funding to increase that figure to 90%.

The BIS Committee opposed not only the use of so much public money to fund next generation networks but the method of raising that money.

"[The] levy would be both regressive and poorly targeted. It would have a much greater impact on the less well-off who will pay for an enhanced service which only a minority will enjoy," said the report.

Executive director of strategy and regulation at phone and internet provider TalkTalk Andrew Heaney agreed.

"We know the people who take broadband today and the people who pay premium prices for the better broadband today are the richer ones," he told the Committee. "The reality of this tax is that everybody will pay for a relatively richer group in society to have what today is, frankly, not an essential service and probably a bit of a luxury. That seems unjust in today’s society."

Despite the criticism the Government is pressing ahead with its plans and yesterday the body that will be responsible for the next generation plans came into being. Broadband Delivery UK (BDUK) began work yesterday.

"This report makes clear that without public intervention, some rural areas and less well off communities will be left behind and unable to reap the economic, health and education benefits superfast broadband offers," said Digital Britain Minister Stephen Timms. "Our proposed £1billion Next Generation Fund will help bring the benefits of super fast broadband to more communities. 

“We do not want to risk the digital gap widening, which is why we have put a team of experts in place to ensure further investment is targeted at those people without adequate access," he said.