Monday, 6 July 2009

Extend the UK 50p/line levy to mobile? Ridiculous.

Houston Spencer, Alcatel-Lucent's vice president of marketing and solutions for Northern Europe raised an interesting issue (as reported on Total Telecom) about the GBP0.50/line levy recently announced in the Digital Britain report and intended to fund the roll-out of broadband to underserved areas. Why should this not also apply to mobile? After all, surely wireless technologies will play a critical part in bridging the digital divide, particularly in rural areas. So why shouldn't mobile operators also stump up for this? Particularly if the joint funded mobile roll-out is subsequently jointly owned and utilised. This surely would make it much more economically viable to provide services.

The answer is, of course, that such a levy would be passed on immediately to consumers and in many cases to consumers who couldn't afford it. The social consequences (and the ensuing political flak) would be unacceptable. As of the end of 2008 (according to Analysys Mason's Telecoms Market Matrix) UK monthly prepaid ARPU was GBP10/month. Putting a GBP0.50/month tax onto that line would effectively add 5% to costs. And that's for the average user. Many people spend a lot less on their prepaid phone but rely on it just as much. For the highly price sensitive, mobile, not fixed line, is the most cost effective option with zero fixed cost of ownership. Pushing up the monthly cost of highly price sensitive users by 10-20% could effectively widen the digital divide by depriving these people of access to any form of communications; exactly the reverse of what the levy was aimed at achieving.

Even if such charges were applied only to mobile broadband (and how would one define that anyway when it's possible to use a handset as a modem?) it would also be counterproductive. MBB, thanks to the availability of prepay variants, is much more affordable for price sensitive users than fixed line. Start enforcing higher charges there and you also risk undoing all the good work that MBB has done providing affordable broadband to the masses.


  1. I agree that it's hard to see a levy being productive on PAYG deals. But what puzzles me is why this tax should be a selective levy in the first place. If the operation of the market doesn't produce the service wanted (as appears the case), then it sems to me it has to be paid for out of general taxation. Why a tax that only affects some people?

  2. I agree. Most sensible thing would seem to be to take it from the general tax pot but there are political expediencies to be considered. Mind you, if Gordon's looking for economic stimuli to invest in, it's hard to think of anything more stimulating than broadband.

  3. I don't see why this proposal is unreasonable. If you are going to tax telecommunication services to support universal service, then there is no reasn to excempt mobile. Telecommunications is telecommunications regardless of what device you use. From a technology neutrality stance taxing both mobiles and fixed equally is more fair.

    Now, I'm a bit sceptical 50 pence will make much of a difference, but then again not a single person is going to miss that six quid a year. Postiring behind nominally large percentual increases is disingenius.

    The bottom line is either you are for or against universal service. Personally I'm for it, no matter that I would be the one paying for it rather than benefitting from it directly. You can always argue about how universal service should be funded, but drawing the line at fixed/mobile is pointless.

    If you look really hard at the matter, perhaps universal service funds should in fact come predominantly from mobile. That way wireless substitution would actually help pay for universal fixed broadband availability and we wouldn't have to put up with this useless mobile broadband crap we have now.

  4. Zed, if you're "for" a universal service, why are you for it? To ensure that everyone has access presumably, and thus to bridge the digital divide. If that's so, it seems crazy to impose a fee that would increase the cost of basic voice by 10-20% for those least able to afford it. People on v low incomes tend to rely solely on a prepaid mobile service because it's the most affordable way of staying connected. By levying a fee on all mobile lines you'd be swapping one digital divide (geographical) for another (socio-economic).