Darling’s Broadband Sums Don’t Add Up


It would be good to get 90 percent of the UK on superfast broadband by 2017, as Alistair Darling promised this week, but Peter Judge can’t see how he can afford to do it using the broadband tax

We suppose it might be an editing slip in preparing the speech, but Alistair Darling’s remarks about broadband don’t add up.

In the pre-budget report, he promised next generation super-fast broadband (which usually means 20Mbps) to 90 percent of homes by 2017, and said: “This will be funded through a duty of 50 pence a month on landlines which will be included in the Finance Bill.”

Now, 50p a month from Britain’s 34 million landlines adds up to around £200m a year – so by 2017, the levy will have raised around £1.6 billion.

This is roughly the same as the £1.5 billion BT plans to use to connect 40 percent of Britain’s homes with its next network upgrade which will take fibre to roadside cabinets in Britain’s most populous areas.

But the Government’s plans, taking super-fast broadband to the next 50 percent of the country, will take an awful lot more money, because next-generation broadband does need fibre, and the next 50 percent of people live in smaller towns and villages. The fibre has to go to much further, and reach more places to get them hooked up.

Taking fibre there will cost a great deal more. That’s why BT is stopping at the 40 percent mark, and says the rest are “not economic”. That is why – frustratingly – Virgin is offering fast broadband to the same people.

Rural Broadband

The fact is, that there is not one broadband crisis, but two. As well as a need for fast broadband, we have a need for greater broadband coverage – to get any sort of broadband to the people in rural areas.

The Digital Britain report, which first proposed the broadband tax earlier this year, tried to address both these area – and the Government promised a universal service of 2Mbps. That’s far short of any next generation broadband, but getting it to everyone in the country would be as impressive as getting super-fast service to half of us.

The Government has been very quiet on how to fund rural broadband, and it seems the silence continues in the PBR.

Fast Broadband And Downloaders

But the economics of fast broadband are even more tangled, if we take into account the government’s proposal – in the Queen’s Speech – to get tough with persistent filesharers. Threats to cut them off the net may help curb copyright violations, but they could also cut the demand for fast broadband services. Many people want faster broadband so they can download content – and this would reduce their ability to do that.

Copyright theft is not a good thing, but in the long run, the music and media industries will have to provide cheap and easy sources of honest downloads, and the net cut-off plan may allow them to delay this – thereby decreasing the demand for broadband.

Giving the media industries the punitive content-protection they asked for will discourage them from opening up to 21st century business models. That will depress the demand for fast broadband, and slow the commercial roll-out, leaving more of it to be subsidised by the broadband tax. And that will make Darling’s sums even more wrong.

Click to read the authors bio  Click to hide the authors bio