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EC Puts UK’s £6 Broadband Tax Under The Microscope

European authorities are checking whether the broadband levy, proposed in the Digital Britain report, complies with competition rules

The European Commission is scrutinising the UK’s proposed broadband levy, but has told eWeek Europe UK that “it is not yet clear” if it will meet EC rules and objectives.

The commission is investigating the UK’s proposed £6 levy on fixed telephony lines designed to fund further broadband expansion in the country, according to a statement sent to eWeek Europe UK on Wednesday. The EC is determining whether it contravenes European guidelines on state support of internet infrastructure.

“Assessing the compatibility with EC Treaty state aid rules of levies and other forms of support for broadband falls within the scope of competition policy,” said the competition spokesperson. “But until such time as the UK Government clarifies how it intends to implement this report’s recommendations, we have no comment on whether such a levy may be in line with EU state aid rules. It would all depend on how it would be done.”

However a spokesperson for Information and Media, the other EC department concerned with broadband roll-out, said that the Digital Britain report was being studied closely by the commission and particularly the broadband levy.

“The Commission shares the view of the UK Government that consumers and businesses should be able to benefit from enhanced digital services and next generation broadband services to the largest possible extent possible,” the EC said in a statement. “To this end, it is interesting to see the proposal by the UK Government to finance the roll-out of next generation networks in less densely populated areas by a Next Generation Fund.”

The collection of 50 pence per month from fixed line subscribers for the fund is a proposal that will need to examined in great detail, the spokesman said. “It is of utmost importance to ensure that any funding mechanism complies with competition rules. It is not yet clear if the imposition of such a fee on fixed line subscribers (not on mobile) to finance the roll-out of next generation networks would meet this objective,” he added.

The EC and UK have not always seen eye to eye on digital issues. Earlier this year, the EC issued Britain with a public warning over its perceived support for the Phorm targeted adveritising technology which the European authority claimed compromised user privacy.

On Tuesday, the outgoing communications minister Lord Carter published the long awaited Digital Britain report which outlines the UK government’s plans to support and develop digital content and infrastructure including issues such as rural broadband roll-out, file-sharing and digital radio.

The government also introduced a 50p-a-month tax on phone lines, to create a Next Generation Fund to pay for faster broadband across Britain. Broadband roll-out is also being funded by around 250 million left over from the upgrade from analogue to digital TV.

However, how member states choose to support broadband infrastructure is an issue that the EC has taken as governments must balance the interests providing services to citizens and encouraging private companies to provide, and profit from, new broadband infrastructure.

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Two recent announcements from the EC have touched on this issue of state funding for broadband and its impact on the private sector. Late last week the EC launched a public consultation on plans for what it calls Next Generation Access (NGA) broadband networks. The consultation takes the form of a draft Commission Recommendation which stakeholders can comment on until 24 July 2009.”For consumers and businesses to be able to reap the benefits of competitive very high speed broadband services, we need a common pan-European regulatory approach to NGA broadband networks,” EU Competition Commissioner Neelie Kroes (pictured) said.

The latest EC statement follows an announcement in May in which Ms Kroes warmed that the EC would not allow government stimulus packages – including next generation broadband plans – to break rules limiting state aid for industry. “My objective is to provide a clear and predictable framework for the application of EU state aid rules in this strategic sector,” said Kroes at the time.