Broadband tax will force 100,000 homes to give up internet connection, warns Dunstone

Charles Dunstone, the chief executive of TalkTalk, fears the Government's plans to boost rural broadband coverage will penalise poorer households.

02 Nov 2009

Charles Dunstone, chief executive of ISP TalkTalk, says the Government's broadband tax will force low income households to give up their internet connection Photo: Eddie Mulholland
Mr Dunstone estimates that around 100,000 lower income households will be forced to give up their own internet connections in able to cover the 50p per month tax that will be added to all domestic phone bills to fund the roll-out of next-generation broadband networks.

The tax, which was first proposed in the Digital Britain report, published in June, will last for around seven years, costing each household a total of £42 and raising about £1 billion for investment in high-speed fibre networks. The Government has pledged to ensure universal internet access at speeds of at least two megabits per second by 2012, although concerns remain about how rural "not spots" will be bought in to this network.

Increase in rural communities relying on the internet to do their shopping
UK should look to French 'three strikes' model, says Vivendi chief “This is an unjust and regressive tax on all phone customers which will subsidise mostly richer rural households that can afford high priced super-fast broadband services,” said Charles Dunstone, chief executive of TalkTalk, one of the UK's biggest internet service providers.

“As well as being unfair we estimate that the increase in price will mean that over 100,000 mostly low income homes will be forced to give up their broadband lines. This is wholly inconsistent with the Government’s plans to tackle digital exclusion by increasing uptake and use of broadband.

“Crucially the scheme is likely to delay next generation broadband roll-out in rural areas rather than hasten it as private investors will wait for public funds to be made available. This will mean that much of the tax will be wasted investing in networks that the private sector would have built themselves anyway."

Andrew Heaney, TalkTalk's director of strategy and regulation, is giving evidence to a committee at the Department for Business, Innovation and Skills later today to outline the company's concerns. He will tell the committee that TalkTalk fears the Government has "dodged" proper public debate about the broadband levy, and believes public funds should be spent on delivering essential basic services.

TalkTalk said that the broadband levy was an "unfair tax" that would prove counterproductive, and that the Government should instead focus on enabling private sector investment and encouraging effective competition.

“When broadband first started people said the networks would only reach 60 per cent of the population,” said Mr Dunstone. “The private sector, unaided, actually got to 99 per cent coverage, far further than in most other countries.

“We now need to let the private sector drive next generation broadband as far as it can. Public funding at this stage – in what appears to be an effort to ‘keep up with the Joneses' in Korea, Singapore and the Netherlands – is simply going to waste customers’ money and slow down roll-out.

“To tax all phone customers is not even robbing Peter to pay Paul, it’s just robbing Peter.”