Government policy on broadband needs rethink, Committee says

23 February 2010

The Business, Innovation and Skills Committee today publishes its report on Broadband which concentrates on the delivery of the Broadband Universal Service Commitment, Next Generation Access and digital inclusion initiatives.

In the Report, the Committee strongly supports the Government’s focus on the digital economy and the need to increase broadband speeds but expresses a number of concerns about the policies it has adopted to achieve those ambitions, including:

  • the fairness of the proposed 50p monthly levy on fixed lines
  • the lack of a definition of the proposed 2Mbps Universal Service Commitment
  • the wisdom of financial intervention now to promote higher speed "Next Generation Access"
  • the obstacles the business rating system puts in the way of developing the broadband network
  • the Ministerial arrangements for delivering the Government’s objectives

While the Committee welcomes the Government’s action on digital inclusion, it is concerned that the funding for these important measures is dwarfed by the proposed budget for Next Generation Access.

The Committee rejects the Government’s proposal for a monthly 50p levy on fixed telephone lines to pay for Next Generation Access. It considers the levy to be a regressive tax which will "place a disproportionate cost on a majority who will not, or are unable to, reap the benefits of that charge".

The Committee agrees with the Government’s proposals for a Universal Service Commitment of 2Mbps but is concerned that the Government has not defined what 2Mbps will mean in practice. It believes that the definition should be the delivery of a minimum 2Mbps, under normal circumstances, to all users at all times.

In the report, the Committee also argues that early Government intervention in Next Generation Access 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.

Committee Chairman Peter Luff explained:

"Government intervention at this stage should concentrate on changing policies to encourage investment in the NGA market. Perhaps the best example of this is the business rating system which currently discriminates in favour of BT and against its competitors.

"We believe that the Government should consider a reduction, or even a temporary removal, of business rates on fibre optic cable. This would be a more effective use of limited public sector funds than direct financial intervention."

The Committee also calls for the removal of barriers which prevent access by internet service providers to the BT duct network, municipal ducting, and canal and railway networks which it believes would do much to encourage greater levels of investment in Next Generation Access.

Peter Luff added:

"We are also worried about the current arrangements for delivering the policy, with a part-time Minister also serving in the Treasury. We believe this creates conflict of inerest within the policy-making process – especially on an issue such as business rating arrangements - and does not provide the appropriate level of Ministerial oversight.

"In times of great stringency in public expenditure, digital inclusion not Next Generation Access should be the priority for expenditure. The market can be helped to deliver greater levels of high speed access without significant increases in public expenditure."

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