The government dropped its proposed 50p-per-month levy for telephone lines from the upcoming Finance Bill on Wednesday, creating uncertainty over the future of state funding for high-speed broadband access in the UK.
The decision means the tax will not be passed into law before the general election. BT, likely to have been the chief recipient of the tax's proceeds, has reacted by saying it is not surprised and is looking forward to greater funding certainty after the election.
Labour had said it would charge a 50p levy on every line in the country to extend the rollout of fibre-based broadband access to 90 percent of the country, which would give people download speeds of up to 100Mbps. The levy was to provide a fund of £150m a year to support the deployment in areas that the market was thought to be uninterested in serving.
The levy could be permanently axed after the election, according to Andrew Ferguson, editor of the broadband blog Thinkbroadband. Speaking to ZDNet UK on Wednesday, he said a Conservative government would likely scrap the levy and replace it with a slice of the TV licence, while a Labour Government would re-introduce it in the summer.
"We expect it to be reinstated if there is a Labour government," said Ferguson. "But if we have a hung parliament and it's not working, then that would be bad."
Ferguson said there could be disagreements in a hung parliament over how funding for next-generation broadband should be secured. Labour prefers funding for next-generation broadband to be allocated in advance, while the Conservatives prefer a more commercial approach with state funding only potentially available from 2012.
"We could see this levy taking six or 12 months to get through. The danger is, BT, Virgin and i3 Group and the other emerging firms may have had plans and may put them on hold," Ferguson said.
BT said it was frustrated by the lack of certainty over funding, but did not specifically say the shelving of the levy would affect its rollout.
In a statement, the company said: "This development is no great surprise. Whilst there is a political consensus that public funding may be required to roll out fibre on a near universal basis, there was never agreement on the levy itself. The lack of certainty over that funding is frustrating, but BT will continue rolling out fibre on a commercial basis and looks forward to there being clarity post-election."
BT has already committed to rolling out super-fast broadband to 10 million homes — around 40 percent of the population — by 2012. The company has frequently said it would require public funding to extend that rollout.
According to the Broadband Stakeholder Group, which produced a report on the subject, BT and other commercial players would provide super-fast broadband to a total of two-thirds of the population, while the next-generation fund would extend coverage from two-thirds to 90 percent of the population.
The Finance Bill will now be delayed until after parliament reconvenes on 18 May. Sources close to the government say if the Conservatives take power, their replacement for the levy would have to wait for a new budget, then for a revised Finance Bill to be written. A Labour government could push through the Finance Bill shortly after 18 May, sources said.
The government has already set up an organisation within the Department of Business, Innovation and Skills (BIS), called Broadband Delivery UK (BDUK), to oversee the allocation of the next-generation access fund. BIS declined to comment on the effect of the levy's shelving on BDUK's activities because of the upcoming election.