Broadband tax could fund TV news bulletins

Internet service providers could face a new tax to help pay for unprofitable programmes shown on ITV and Channel 4, which may in turn lead to higher broadband charges for consumers. The levy could be imposed by the Government on the service providers and websites within the next few years, under proposals published yesterday about the future funding of "public service" programmes which make little or no money for commercial broadcasters.

The proposals were made by Ofcom, the telecoms watchdog, which insisted that any new charges would fall on the companies providing the goods and services - although the firms could pass on these extra costs to their customers. A broadband tax is one option being considered by Ofcom to secure the future of the commercial broadcasters' public service programmes, such as ITV1's regional news and Channel 4's current affairs strand Dispatches.

The regulator is also concerned about the future of children's programmes and science, arts and history shows on commercial channels. By 2013, Ofcom predicts total funding for commercial public service broadcasting such as this will have fallen by around £335 million from its 2003 level of £520 million.

New levies on different parts of the media - such as other commercial broadcasters, equipment sales, broadband firms or UK online content providers - could be imposed in a version of a model suggested for French broadcasting. Ed Richards, the chief executive of Ofcom, insisted it was not suggesting introducing a direct tax. "I don't want to go too far with this - we're an independent regulator and we're setting out the logical range of issues," he said. "One of those which you might be closer to is industry levies. We haven't included new taxes on individuals, no. I don't think that makes any sense. There's the general source of general taxation - I can't see any logic for creating an additional personal tax. Industry levies is a different matter."

Other proposals in Ofcom's report include "top-slicing" - requiring the BBC to share the licence fee with commercial broadcasters, or subsidies from the Government paid for out of general taxation. Mr Richards said Ofcom had not yet made any decision on which of the many funding options it would favour when it makes its final recommendations early next year.

However, the range of proposals was criticised by the pay-television operator and broadband provider BSkyB. "Ofcom shouldn't swallow the argument that Channel 4 and ITV would stop producing original programmes if they didn't get public money," said Graham McWilliam, its group director of corporate affairs. "Most of what these broadcasters provide is a result of market forces, not regulatory intervention."

Ultimate decisions on funding rest with the Government. It has not yet decided when it will introduce the next Communications Act.

Regulator's suggested finance plans:

Direct public funding: money would go straight from the Government to broadcasters. It would come either from general taxation, or funds raised by charging for other broadcasting "spectrum" - for example, the space used by new high-definition channels.

Regulatory assets: the commercial broadcasters could be given cheap or free access to Freeview slots, guaranteed prominence on the electronic programme guide, or looser advertising rules in exchange for promising to provide public service programmes.

Industry funding: levies on other parts of the media industry, such as internet service providers.

BBC licence fee: this could be split between the BBC and other broadcasters.