A mixture of hilariously bureaucratic and interest-tailored taxes and a central government that has stumbled over budget insolvency and broken promises has created an interesting situation for UK telecom policy. The recent Labour victory was due, in part, to the promises of “the fastest broadband in Europe.” Some time after those promises, with Labour in power, we are without any real plan to create this broadband superpower.
With no plan, no money, and no motivation what will the liberal brits do? As one ZDnet writer says:
The private industry will have to build the networks themselves with consumer provided money. Though at least this is a fall-back plan and would not be as secure had it not had government backing, the review which taxes fibre network operators is making the task even more difficult.
That’s right lowly capitalism will have to be the “fall-back” plan. The phrasing here is enough to make any economist cringe. The fact is, the private market has the ability to, when unencumbered by red tape and politics, create the best and most efficient broadband network. Government intervention here kills the market and produces stockpiles and shortages.
So, as the UK leans on capitalism to drive innovation in broadband it also does everything it can to infringe on the market. All but the top two broadband firms are taxed on the length of the wire they run when expanding broadband service. The other two providers are given a huge competitive advantage as their tax rate doesn’t punish expansion. Nevermind the obvious contradiction of taxing growing companies for their growth while mandating they grow fast, this policy puts a stranglehold on real competition.
My prediction: this tax policy slows the growth of broadband networks and in 5 years the Labour party pushes for a socialistic broadband policy because capitalism has failed. Maybe I’m just cynical.
I hope the Brits learn that instead of “falling back” on capitalism, they ought to get out of its way.