The government has rejected calls to subsidise the cost of rolling out broadband Britain, ending hopes that prices will fall significantly in the short term.
Responding to a report from think-tank the Broadband Stakeholder Group, Douglas Alexander, ecommerce minister at the Department of Trade and Industry, told reporters that broadband technologies such as ADSL were too expensive, but it was up to providers such as BT to find a way to lower prices.
"The recent success of cable shows there is demand at lower prices," he said.
Cable operators, ntl and Telewest, both recently reported more broadband subscribers than BTopenworld. Their cable modems are as much as £10 a month cheaper to run.
The government said there was no case for providing fiscal support to stimulate infrastructure investment through tax breaks. "...the use of the tax system to support particular types of investment should be limited to cases where there is clear evidence of market failure, sufficient to justify the costs of intervention... the government does not believe the criteria apply in this case."
Alexander emphasised the number of competing technologies available or being developed, DSL, cable, satellite and radio being the main four, and said that competition would make broadband cheaper. "There is no one solution," he said.
He said that government-commissioned monitoring of the market showed demand for broadband connections was increasing, but added that the number of 'Broadband Britain' users was still disappointing.
What the government will do, is promote existing tax breaks that business and broadband content developers are eligible to receive. It will also centralise its own purchasing of broadband services and promote the development of broadband-specific content.
"Too many people in the sector don't realise that there are a number of relevant initiatives including tax relief on establishing and maintaining broadband connections, that also apply to employers paying for connections at employee's homes," said Alexander.
The Broadband Stakeholders Group said it was "pleased" that the government had adopted 14 of its 15 proposals, but criticised the government's refusal to subsidise further investment.
"The benefits of broadband to UK plc justify the introduction of fiscal incentives for insfrastructure roll-out, and the government needs to recognise this," the group said in a written statement.
Last week, it conceded that even if all its recommendations were adopted, Britain had no chance of achieving its aim of "having the most extensive and competitive Broadband market in the G7 by 2005."
The UK is currently just 22nd for broadband adoption in developed countries.
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