MPs slam planned phone levy, urge focus on cheaper, proven digital inclusion plans

The Government should drop its 50p per month tax on phone linesand put its plans to increase superfast broadband coverage on hold,MPs have said. The tax is regressive and unfocused, they said.

The Business, Innovation and Skills Committee of MPs hasinvestigated some of the proposals of last summer's Digital Britainreport, which the Government adopted as policy and is turning intoconcrete plans.

One of those plans is to greatly increase the coverage of 'nextgeneration' superfast broadband networks. The Digital Britainreport concluded that the market will only provide two thirds ofthe UK population with that connectivity and that Government shouldfund the provision of networks to the final third.

The Government plans to do this and plans to levy 50p on monthlyphone bills for all fixed-line service in order to do it.

The Committee opposes both the tax and the prioritisation ofnext generation networks. It has said in a report that there is notclear demand for superfast broadband and that even if there werethe tax is not the best way to pay for it.

"The Government’s proposals to intervene more widely in the NextGeneration Access (NGA) markets are unwise at this stage," said theCommittee's report. "Early Government intervention runs asignificant risk of distorting the market and will not allow timefor technological solutions to extend the market’s reach across thecountry."

"Furthermore, there is little evidence to suggest a pent-updemand for this enhanced service with consumers currently unwillingto pay the premium for such services," it said. "Governmentintervention at this stage should concentrate on changing policiesto encourage investment in the NGA market. This could best be donethrough the tax and regulatory systems."

The Committee said that charging the flat levy was regressive,meaning that it took no account of people's income, and that itforced all users to pay for a service which only a small numberwould ever want to actually use.

"Such a levy would be both regressive and poorly targeted. Itwould have a much greater impact on the less well-off who will payfor an enhanced service which only a minority will enjoy," it said."If public funds are required for Next Generation Access, theyshould be raised through general taxation, in the same way as forany other national infrastructure programme."

Executive director of strategy and regulation at phone andinternet provider TalkTalk Andrew Heaney agreed in his evidence tothe Committee.

"We know the people who take broadband today and the people whopay premium prices for the better broadband today are the richerones," he said. "The reality of this tax is that everybody will payfor 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."

The Committee said that neither the minister responsible forturning Digital Britain recommendations into policy, Stephen Timms,nor his department could definitively say if the money raisedthrough the levy would be formally ring-fenced solely for use inbuilding next generation networks. This, the Committee said,undermined the credibility of the tax.

The Committee said that the Government should spend more of itstime and money on existing plans that would involve more people indigital society and the digital economy at far less cost than thenext generation network plans.

"Greater attention and resources should be given to digitalinclusion which delivers proven social and economic benefits to theindividual and the cost saving benefits to the Government," itsaid. "However, funding for these important measures is dwarfed bythe proposed budget for Next Generation Access. In times of greatstringency in public expenditure, digital inclusion not NextGeneration Access should be the priority for expenditure. Themarket can be helped to deliver greater levels of high speed accesswithout significant increases in public expenditure."

The Committee backed the Government's plans to spend £200million ensuring that everyone has access to 2MB per secondbroadband by 2012, though it did express concerns that thedefinition of 2MB per second broadband had not been pinned down bythe Government.