When IT Meets Politics

Sep 9 2008   10:16AM GMT

Superfast Broadband costs less than the 3G Licenses

Philip Virgo Profile: Philip Virgo

Tags:
3G
bsg
CIAO

Add inflation to what was paid for the 3G licences and you have about the same as the Broadband Stakeholders Groupc believes would cost to bring “superfast” (alias equivalent to that already available around much of the Pacific Rim) to the whole of the UK.  

Their estimate of £29 billion is, however, for fibre. It would cost much less if rural areas to be were served by satellite and wireless. More-over that would allow also facilitate the infrastucture competition, alternative routings and resilience that are currently lacking. 

Had government not blown the billions it got from selling the 3G licences it would be a no brainer to pull through the necessary investment on the back of Project Ocean, the concept of rationalising and overhauling the current fragmented public sector communications networks.

However, we need major investment programmes to help get the UK out of deepening recession and government no longer has the money.

The Chancellor should therefore take a leaf from Geoffrey Howe’s book, when he faced a similar situation after the Conservatives came to power in 1979: bring in a period of 100% capital allowances for investment in fast broadband and accompany this by a reform (if not complete abolition) of business rates on infrastructure 

The Secretaries of State for Culture and for Business should then remind Ofcom that a review of its remit and success is overdue and it should remove the obstacles that prevent comms players from competing to give discounts for 3 – 5 year service contracts – including to the public sector – to fund new investment as opposed to “merely” sweating old assets.

Such combinations have been used successfully around the world (including in other parts of the EU so it is not in breach of their procurement rules) to turn high risk investment into low risk leasing deals – and thus slash the csot of capital.  

Some years ago a study by the BSG showed that 100% allowances should be fiscally neutral: i.e. the taxes on those doing the work would be greater than any “lost” corporation tax even in the short term. More-over even that corporation tax would not be lost, but delayed and multiplied.

The time has come for strategic and political vision for broadband future of the UK, not just the current tactical and regulatory reaction to events.

But experience tells us that the best contribution of government is to get out the way – to undo the distortions it has itself brought to the market and stop there.

If it cannot repay the 3G licence fees it can at least start to bring its corporation tax regime into line with the rest of the world and stop taxing fictional profits before they are made. That is the “real” meaning of the 100% capital allowances (and equivalent) that are commonplace among our overseas competitors when government cannot afford to do what is necessary.  

. P.S. If you have not yet made your inputs to the CIAO review – why not?

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