The Government is reportedly considering the introduction of an £11 (monthly) “Home Internet Levy” on existing consumer broadband bills to replace the existing BBC TV licence fee. The idea is understood to have been proposed to the Culture Secretary, Lisa Nandy, by the cross-party Social Market Foundation (SMF) think-tank.

At present a standard colour TV licence fee costs £180 per year, although many view the charge as being increasingly difficult to justify in an age where traditional TV is rapidly losing ground to modern independent commercial streaming platforms. But this presents a problem because public service broadcasters, such as the BBC, remain largely dependent upon the money it raises.

On top of that the government are currently considering plans to switch-off terrestrial TV signals, in either 2034 or 2044, as part of a wider change to reflect the move to internet-based streaming, provided gigabit broadband coverage and take-up is ready to support the transition. Both of these related issues have long been political hot potatoes, which has made it difficult to reach consensus on the best way forward.

The SMF is one of the organisations that has been examining the TV licence fee issue and, according to the Sun, they’re understood to have proposed that every home with a broadband connection could automatically help to fund the BBC, even if nobody in the house watches live TV, via a new £11 (monthly) “Home Internet Levy” on their existing ISP bill. A special discount would also be introduced for those who take Social Tariffs to protect low-income users.

The SMF’s report indicates that an alternative option also being considered is a smaller “News and Culture Levy“, said to be worth £2.30 a month. But this would instead be added on top of the existing TV Licence Fee rather than replacing it. Both approaches are controversial and likely to produce a backlash.

A DCMS spokesperson said:

“The BBC must be funded by a model that is sustainable and fair to all those that are paying it. Through Charter Review, we are looking at a range of options, including how the BBC can operate more efficiently, generate more commercial revenue, and how the licence fee could be reformed.”

The idea of a levy on broadband bills itself is nothing new and has come up several times before as an alternative to the TV Licence Fee model, most recently in 2022 as part of the initial stages of the current review. But adding c.£11pm to the cost of broadband would be tricky to implement (e.g. forcing those who don’t watch the BBC to pay), although if you currently pay for a standard TV Licence then this works out as £132 per year – a bit cheaper.

The idea also raises plenty of technical questions over what kind of broadband connections would be applicable (i.e. only fixed lines or also mobile, and what about Starlink?) and how ISPs would pay the charge, as well as who is going to cover the costs of implementing all this.

Broadband providers are commercial companies, not government agencies, and there’s a wider risk of discouraging fixed broadband adoption at a time when network operators are desperately trying to grow take-up. Some homes and small business on consumer-grade lines also have multiple broadband connections (putting my hand up there), so would they end up having to pay multiple times?

However, none of this will necessarily solve the underlying funding problem, since the main challenge is that licence-fee payer numbers are falling as viewing habits change. Simply changing the collection mechanism without addressing the more tedious question of what should and should not be publicly funded may not go far enough.

As it stands the government has not made any decisions and continues to consider a range of options, but their time is running out to make a decision. Whatever they do, it’s likely to be unpopular.

UPDATE 1:10pm

The UK Internet Service Providers Association (ISPA) has issued the following comment on this.

Andrew Kernahan, Head of Public Affairs, said:

“Adding a tax onto broadband bills that would not be invested into broadband networks or services would not benefit consumers. ISPA members are already under significant pressure to contribute towards easing the cost of living for consumers, including by signing the government’s Telecoms Consumer Charter, whilst also continuing to invest over £40bn in meeting the government’s target for nationwide gigabit-capable broadband to bring faster, more reliable and cheaper networks.

Broadband providers are operating in a challenging investment climate as they finish the infrastructure rollout, including the hardest to connect the most expensive parts of the country. Investors need confidence that the UK sees digital connectivity and infrastructure as a priority, not as a new source of tax.

Such a levy would also raise questions on whether broadband providers would be expected to oversee the collection and enforcement of the license fee, which is not an appropriate role for them to have and would exert further costs on operators.

It is no surprise that a House of Lords Committee report in 2022 already recommended against a broadband levy to fund the license fee on the basis that it would “introduce unfairness” and offer “few advantages”.

The sector remains committed to working constructively with the Government so that everyone benefits as the country moves to an increasingly digital future.”