Darling’s broadband policy: too slow, too little and too late

The Chancellor’s announcement of a 50p duty for broadband was no surprise since it echoed earlier Government decisions on universal broadband. But the policy is beset by a number of problems including speed, cost, and timing.

First, the use of the word “super-fast” in the Chancellor’s speech is inaccurate since the proposed speed of 2 megabits per second (Mbs) in the Carter report does not compare with current speeds available in a number of Asian countries of 100Mbs.

Second, as industry commentators have pointed out, the 50p-a-month number is disingenuous. Everyone will pay an additional 17.5 per cent VAT on the duty. The tax now applies to cable, fibre optic, and fax line connections meaning the tax will treble for about 1.7 million people.

Third, fibre optic cable required to connect this broadband network together has its own complicated commercial rates system of tax. In a village of 100 people it is unlikely to be commercially viable to connect them via a wired network. There does not seem to be a corresponding tax for narrowband copper cables, so there is a tax disincentive to rollout broadband.

Fourth, the broadband tax ignores wireless broadband and mobile connections. Many UK residents have internet connectivity through a smartphone like the Apple iPhone or a ‘dongle’ which plugs into a laptop. This ubiquity is in stark contrast to the estimated 166,000 rural households who have no access to the internet at all according to BT.

Is it enough money?  Technology blog Crunchgear estimated that the tax would bring in about £170 million a year. This equates to just under £1.2 billion by 2017. By comparison, Japanese carrier NTT was looking to spend $40 billion (£24.6 billion) between 2005 and 2010 to provide true superfast broadband to 30 million households. So the UK commitment is out by an order of magnitude from what is likely to be required.

Is it too late? As Nick Osborne and I have previously outlined on this blog, many countries have already leapfrogged the UK’s stated efforts to roll out broadband and, in seven years time, the gap will look even wider. During that time there would have been roughly five generations of computing technology bringing with it new markets, demands and ways of getting more things on and off the internet.

There you have it in a nutshell: too slow, too little and too late.