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Fibre-optic broadband

The government’s plan to introduce a tax on all ADSL broadband connections to fund the construction of a fibre-optic broadband network could be at risk, it has been speculated, amid concerns that the levy may not comply with competition regulations.

In this week’s Digital Britain report, the government laid out a series of proposals intended to ensure the UK does not get left behind by the digital revolution. Chief among these was the introduction of a tax of 50p per month on all households with a standard copper wire broadband connection.

It is hoped that the levy will provide sufficient revenue to subsidise the construction of a next-generation network in remote areas where it is not commercially viable for broadband providers to do so alone. According to Lord Carter, who helmed the report, these constitute up to a third of the UK.

However, it has now emerged that the proposed levy could fall foul of European Commission (EC) regulations. A rejection of the proposal by the EC would leave the government facing a huge income shortfall for the scheme at a time when state budgets are already under strain.

The revelation that the plans are under scrutiny by the European regulator followed a statement sent to eWeek Europe yesterday. This disclosed that an examination of the tax is to be conducted amid concerns that it may contravene guidelines over state subsidies being used to build internet infrastructure. These are in place to promote competition among broadband providers and protect consumer interests.

A spokesperson for the EU 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 to finance the roll-out of next generation networks would meet this objective.”

News of developments comes after Tom Leathes, director of Top 10 Broadband, recently warned that market forces rather than state intervention will be the driving force behind the transformation of the UK’s broadband infrastructure.

Mr Leathes claimed that demand for online entertainment services will make the construction of fibre optic networks more viable for broadband suppliers. This is because applications such as iTunes and the iPlayer require a fast and robust connection of the kind that next-generation networks are best placed to provide, he said.

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