Broadband - Business, Innovation and Skills Committee Contents


In July 2009, the Government published the Digital Britain White Paper which set out the Government's vision for the digital economy. We strongly support the Government's focus on the digital economy—the United Kingdom's competitiveness is, to a significant effect, dependent on its telecommunications network. The Government's ambitions for the digital economy are laudable, but we have a number of concerns about the policies it has adopted to achieve those ambitions.

Digital Britain is a vital part of public policy which will define the United Kingdom's telecommunications networks for years to come. We believe, therefore, that there must be a full-time Minister dedicated to the issue. The current arrangements, with a part-time Minister also serving in the Treasury, create conflicts within the policy-making process and do not provide the appropriate level of ministerial oversight.

We agree with the Government's proposals for a Universal Service Commitment of 2Mbps. This is an appropriate and achievable ambition. But the Government has not defined what 2Mbps will mean in practice. A clear definition is vital for early delivery of the Universal Service Commitment. We believe that definition should be the delivery of a minimum 2Mbps, under normal circumstances, to all users at all times.

We share the Government's enthusiasm for a swift roll-out of Next Generation Access networks across the country. We also agree that Government funding for Next Generation Access networks may, at some stage, be necessary to deliver the Universal Service Commitment to remote areas where broadband access will not be provided by the market.

However, the Government's proposals to intervene more widely in the Next Generation Access markets are unwise at this stage. Early Government intervention 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. Furthermore, there is little evidence to suggest a pent-up demand for this enhanced service with consumers currently unwilling to pay the premium for such services.

Government intervention at this stage should concentrate on changing policies to encourage investment in the NGA market. This could best be done through the tax and regulatory systems.

The business rating system 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. We also believe that the removal of barriers which prevent access by internet service providers to the BT duct network, municipal ducting, and canal and railway networks would do much to encourage greater levels of investment in Next Generation Access.

We disagree with the Government over its proposal to fund its intervention in the Next Generation Access market with the proceeds of a 50 pence levy on fixed telecommunications lines. Such a levy would be both regressive and poorly targeted. It would have a much greater impact on the less well-off who will pay for an enhanced service which only a minority will enjoy. If public funds are required for Next Generation Access, they should be raised through general taxation, in the same way as for any other national infrastructure programme.

Government intervention is rightly being made through the work of the Digital Inclusion Task Force and programmes aimed at removing barriers to internet access for the less well-off. Greater attention and resources should be given to digital inclusion which delivers proven social and economic benefits to the individual and the cost saving benefits to the Government. However, funding for these important measures is dwarfed by the proposed budget for Next Generation Access. 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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Prepared 23 February 2010