Could a levy on broadband bills replace the TV licence fee?

With BBC funding once again in the crosshairs of the UK Government, could a levy on household broadband bills be the answer to keeping the lights on at the world’s largest public broadcaster?

The future of the BBC was thrown into crisis last weekend, as it was announced that the licence fee is set to be abolished for good by 2027 under new plans being drawn up by the UK Government, with the public broadcaster funded from then on by – what exactly?

Since 1923, the licence fee has funded the BBC’s commercial-free television, radio and online output. Currently, a colour TV licence costs £157.50 per year, while a black-and-white licence costs approx. 7,000 viewers only £53 per year.

A TV licence is required to watch live programming on TV or online, but not to watch on-demand or streaming (apart from on the BBC’s own iPlayer). Failure to comply can result in fines or the threat of legal action.

In the 2020/21 financial year, the licence fee raised £3.8 billion, but a combination of absorbing the cost of free licences for over-75s and the suspension of enforcement during lockdowns has left the Beeb’s coffers lacking. Now, privatisation, government funding, or a subscription fee akin to Netflix or Amazon Prime have been suggested as new means to fund the broadcaster.

Back in 2020, in response to a Department for Digital, Culture, Media & Sport (DCMS) consultation on the decriminalisation of not paying the TV licence fee, the BBC raised their own suggestion; charging a monthly levy on domestic broadband bills.

Based on current licence fee costs, this levy could add approximately £12.80 per month, though with fee rises before 2027, it could end up adding much more.

The BBC considers the new model “simpler, more efficient and more automated.” Despite this fanfare though, the cost of implementing a new system is estimated to be £300 million. Further, decriminalisation of licence fee evasion will cost £200 million a year as the number of non-paying households would likely double to around 10%, making cuts to some services inevitable.

Many countries already levy their respective licence fees or equivalent on household bills. “Public services taxes” largely fund public TV in Denmark, Finland, Iceland and Sweden, while the BBC’s consultation cites in particular the fees included in taxe d’habitation (council tax) in France and as part of electricity bills in Italy since 2016.

The BBC is “not, at this stage, advocating” for the levy, and is yet to outline how this new model would operate, or how much freedom ISPs may have to implement the levy. Could providers cut deals with the broadcaster and extend a lower price on to customers, or bundle the levy with other services?

In a reversal of fortunes, back in 2010, the coalition government had opted to “top-slice” a portion of the licence fee to fund the government’s gigabit-capable broadband rollout, before subsequently dropping the plans. With 2027 expected to see the completion of this upgrade, and as streaming via 5G becomes more viable, more and more users will inevitably consume this content digitally. Will fixed and mobile connections be charged at a different rate?

Research by Ofcom found that, during the COVID-19 pandemic, more than a quarter of respondents said they were using the BBC more, and three-fifths of respondents had a positive overall impression of the BBC, particularly for its streaming content, news, and education platform, BBC Bitesize.

The move will nonetheless be highly unpopular with those already not consuming any BBC content; the low-tax advocates at The Taxpayers’ Alliance have dubbed the levy “protection money” that would “be terrible for smaller providers, whack up prices and drive poorer people offline.”

UPDATE [21/01/2024]: The Irish government has proposed adding a €15 a month levy on phone and broadband bills to fund RTÉ, the national broadcaster, replacing the €160 annual licence fee.

Update [23/07/2024]: Half a million households in the UK cancelled their licence fee in the previous year, putting the future of BBC funding into question.