A broadband tax for the UK?


6:45 pm - January 27th 2009

by Cabalamat    


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Further to a recent post (on my blog) suggesting that the UK isn’t going to institute a “3 strikes” law, there is speculation that the government might instead introduce a broadband tax, where ISPs’ customers will pay and the money going to the music industry to compensate for the loses they’ve suffered through P2P filesharing. According to The Times:

Lord Carter […] may suggest additional charges on customers’ broadband bills to compensate the music industry.

There are a number of issues with any such proposal:

Who gets the money? Obviously it should go to the musicians who actually create the music rather than to the fat cats at the big four record companies to spend on “fruit and flowers” (an industry euphemism for prostitutes and illegal drugs). And unsigned bands if they have a significant following are just as deserving of a share of the money as anyone else.

Open Content: The whole point of this proposal is as a quid-pro-quo for P2P downloads, making P2P downloads legal. Since the distinction between a legal and an illegal download will no longer exist, it follows that musicians that publish under a open content license (such as one of the Creative Commons licenses) are equally deserving of being rewarded as those who have hitherto published under a more restrictive copyright license.

Gaming the system: Should then musicians be compensated strictly according to a measure of how often their work gets downloaded? If so, people might try to game the system, e.g. a musician might pay a botnet to download multiple copies of their work.

Content other than music: It is not just music that appears on P2P networks. Other material shared includes movies, TV programmes, computer software (particularly games), and books. Clearly if one deserves compensation, they all do.

Paying for what you don’t get: People are entitled to ask “why should I pay for stuff that I don’t get?” As Dave Perry, a commenter to the Times article puts it:

I don’t download ANY music, so why should I have to pay a levy on my broadband connection because other people (who I cannot influence) do? The basis of fair taxation (because that is what this proposed levy is) would be breached by this proposal.

Where does the BBC fit in? The last remark is something often said by people who don’t feel they should have to pay for the BBC since they don’t watch BBC TV programmes.  Looking ahead, television is over the long term (next 5-20 years) going to merge with the Internet, and many people watch BBC (and other) TV programmes over the Internet anyway, which brings the future of the TV license into question.

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If these are the issues, what sort of broadband tax regime is the solution? One possible solution would involve the creation of a series of Content Compensation Funds. A CCF would be a special type of legal entity that would be authorised to spend the money raised by a broadband tax. I envisage that legislation would be needed to create the legal basis for CCFs.

A CCF might be an existing entity repurposed to the task, such as the big four music companies, performance rights organisations, and TV companies such the BBC or ITV. Maybe the Free Software Foundation could act as a CCF to fund software. Perhaps an authors’ society could fund money towards authors. It may be that new organisations are created to be CCFs. I envisage that there might be between 20 and 100 CCFs.

A CCF would be authorised to spend its budget funding content creators either for works that’ve already been created (the “funding post creation” model) or commissioning new works to be created (the “funding pre creation” model).

The clever bit is how the broadband tax would be distributed among CCFs. Everyone with broadband would be required to pay a monthly broadband tax. This might be a fixed amount for everyone (e.g. £5 a month) or it might vary according to the size of the broadband bill or the speed of connection. But either way, each taxpayer would decide which CCF or CCFs their payment goes to.

So Alice who likes music might channel 100% of her payment to a music-based CCF. Bob, who likes TV programmes and computer games, may channel 50% of his payment to an audiovisual CCF and 50% to a games software CCF. And Carol, who likes reading SF, may channel her payment to a science fiction CCF that commissions new science fiction works (which may be books, films, etc).

It’s often said, particularly in the USA, that the newspaper industry is dying. That may be true of newpapers printed on dead trees, but there’s still an important role in organisations that gather news. One can imagine newspaper CCFs (perhaps based on existing newspapers) that perform this role. They’ll be web based, and their output won’t be restricted to text and still pictures.

Because there will be lots of money in the system (if 15 million broadband subscribers each pay £5 a month, that’s £900 million a year) there is the potential for fraud and waste. The “payer decides” system minimises that: if a CCF gets a reputation for being corrupt or for wasting most of its income, its income stream will quickly dry up. (Payers will be able to easily change the allocation of their payment every month via an Internet-based system). In this way CCFs will be responsive to market forces.

There would need to be other safeguards against people trying to game the system. For example a CCF might offer to give a taxpayer a reward of £2.50 for every £5 channeled their way. Any such inducement would have to be illegal. More broadly, a detailed record of a CCF’s accounts should be public and on the web (because essentially all large transactions are done electronically, this could be done without extra administrative cost, because it would be built into the accounts software the CCF uses). If a CCF knows their dealings are public, they will be less willing to commit fraud, and more likely to be caught if they do.

Another safeguard against fraud is that all CCFs would be monitored by the relevant government department. To set up a CCF one would have to pass various requirements. They shouldn’t be enormously difficult, but nor should they be absolutely trivial. The more CCFs, the better, because it gives payers more choice in where to channel their broadband tax, and makes CCFs work harder in attracting payers’ money. But also the more CCFs, the worse, because the more of them that there are, the harder they’ll be to regulate; in the eaxtreme case if everyone is allowed to set up a CCF what’s to stop Alice setting up one and paying her £5 a month to it? Or if that’s banned, Alice and Bob could do a deal where they each pay into each other’s CCF. Where to draw the line between between too easy creation of a CCF and too difficult is something that would have to be determined by trial and error.

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About the author
This is a guest post. Cabalamat writes at Amused Cynicism, mostly about foreign affairs, digital rights and civil liberties.
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Reader comments


1. Kardinal Birkutzki

You’ve never partaken of any of this “fruit and flowers” then, I take it….

Lord Carter is a Labour peer? To whom is he a non-Parliamentary consultant?

As much as I have sympathy with the need to find revenue models for industries that have been disrupted by the internet and digital media, a tax of this kind isn’t it.

When is the record industry going to wake up and realise that it has no God-given right to keep us tuck in a time warp. They’re the sort of people who protested against railways because they damaged the business of canals. The market is dynamic and disruptive, modern technology is forcing you to change and adapt, that’s life.

5. Alisdair Cameron

How about no ‘special’ tax on broadband, especially not one to prop up the senior managers of industries who’ve grown fat by ripping off the actual creative talents, but whose business plans have become unworkable (thank God) for keeping those top-heavy dinosaurs in the style (coke’n’country mansions) to which they’ve become accustomed?

6. Mike Killingworth

I know what this government’ll do. It’ll set the tax at two rates, a low one (say £1/month) for people who allow a widget to be installed on their machine to tell the State everyone they send an e-mail to and every website they visit and a high one (say £10/month) for everyone else – and hey presto! they’ve got their list of subversives they can watch…

And of course they won’t go for CCFs. The “fruit and flowers” boys will be ever so grateful for the money – 10% of £900m in the first year will pay for Labour’s election campaign and the one after that.

@3 Rob Knight: As much as I have sympathy with the need to find revenue models for industries that have been disrupted by the internet and digital media, a tax of this kind isn’t it.

Then what is?

@4 Richard: They’re the sort of people who protested against railways because they damaged the business of canals.

Good analogy. The same sort of people who forced cars to be preceded by a man waving a red flag.

@5 Alisdair Cameron: especially not one to prop up the senior managers of industries who’ve grown fat by ripping off the actual creative talents

I think my proposal answers this point. A CCF will only get funds to the extent that it does what broadband subscribers want. So the music industry won’t be able to just rake in the cash; they’ll have to earn the money.

@6 Mike Killingwirth: I know what this government’ll do. It’ll set the tax at two rates, a low one (say £1/month) for people who allow a widget to be installed on their machine to tell the State everyone they send an e-mail to and every website they visit and a high one (say £10/month) for everyone else – and hey presto! they’ve got their list of subversives they can watch…

Stop it, you’re giving them ideas.

And of course they won’t go for CCFs.

CCFs put people in control not politicians. So of course top-down managerialists won’t like the idea.

I think we should abolish all intellectual property laws, save the ones that ensure people cannot pretend someone else’s work is their own.

@9 Nick: I think we should abolish all intellectual property laws

Maybe we should. In any case, doing so would be independent of my proposal.

“As much as I have sympathy with the need to find revenue models for industries that have been disrupted by the internet and digital media, a tax of this kind isn’t it.”

Why not? It is a tricky one to get right, but the industry from the indies up to the smaller majors are on board with this idea. In fact the only people that are less up for it are the major labels as they know they’ll have to give up some of their power and revenue.

What a great idea.

Perhaps we should also tax digital cameras and give the money to Kodak.

Or tax SMS to support the out of work pigeons…………

Maybe it’s time to abandon the notion of intellectual property? Plumbers don’t get paid everytime someone takes a shower so why should a musician (or their decendents) continue to earn for something they did decades ago? At present the arguement is that the record companies continue to make money but restrict copyright to a couple of years and anyone can distribute the music. Property laws were developed for an economy where consumption meant there was less to go around: they are obsolete where the media is concerned.

“Perhaps we should also tax digital cameras and give the money to Kodak.”

And winner of most hilariously missing the point through lack of reading the article goes to….

“@9 Nick: I think we should abolish all intellectual property laws

Maybe we should. In any case, doing so would be independent of my proposal.”

Well ok. I think we should abolish all intellectual property laws and NOT use a dodgy state apparatus to funnel money to alleged artists or intellectual workers either. In areas where individuals need compensation for their work, systems of funding will emerge naturally in the absence of coercion. Indeed something along the lines you describe might be appropriate, but voluntary rather than in the form of a tax.

Maybe it’s time to abandon the notion of intellectual property? Plumbers don’t get paid everytime someone takes a shower so why should a musician (or their decendents) continue to earn for something they did decades ago?

100% agree with that, and a tax on broadband use is utter nonsense – that is taking the whole thing back to the stone age.

When will people get it through their heads that taxation isn’t the be all and end all.

You go out and buy a book, you read it, then you can either pass it on or take it to a second-hand book store/stall and then trade it – where is the revenue for the author?

You can also do the same with a CD – look on local markets and you can find them. OK – I agree if the thing is sold for cash there should be a little kick back for the author, why not?

Yet, I cannot see where taxing everyone comes into all this!? Taxing a granny who uses the net for looking at pic’s of Little Johnny and Sarah who live in Australia is fair taxation? Feck that!

We use Ares Premium – that means we pay the vendor, or we just use iTune’s store. Why should I pay again even though we already pay for our music?

I don’t know if it is a British disease about technology – but for some reason it isn’t embraced and then industry adapts to it. That can be said for other cash-cow industries in other countries but for Christ’s sake.

You can make up any amount of figures you wish – that doesn’t come into anything, but, and this is a serious question, if Robbie Williams can get a contract from Sony for 80 million quid they are making a fair crack, they must be.

This is a commercial aspect of society and it is up to the business to sort it out not have government tax people because the music industry won’t upgrade itself.

See this.

“Yet, I cannot see where taxing everyone comes into all this!? Taxing a granny who uses the net for looking at pic’s of Little Johnny and Sarah who live in Australia is fair taxation? Feck that!”

The reason why I support this rather than a more blanket one for movies and games also is because Music is something that influences and affects us all. Does that granny never listen to music? Does anyone not enjoy or benefit from a musical scene in some way?

Music needs to be seen less as an individual commodity and more as a social one, and a fair taxation on the main means of distributing it is the way forward.

“We use Ares Premium – that means we pay the vendor, or we just use iTune’s store. Why should I pay again even though we already pay for our music?”

You’re assuming current systems would be exactly the same under a system where we’re taxed? Don’t you accept that for a taxation system to work the current systems need overhauling?

“You can make up any amount of figures you wish – that doesn’t come into anything, but, and this is a serious question, if Robbie Williams can get a contract from Sony for 80 million quid they are making a fair crack, they must be.”

It’s not Sony music who needs the support.

“This is a commercial aspect of society and it is up to the business to sort it out not have government tax people because the music industry won’t upgrade itself.”

It’s nothing to do with upgrading anything. The upgrading has happened to the current generation and the next generation isn’t necessarily in sight. They upgraded too long and as such let illegal downloading take hold. Commercially they have dropped the ball and are losing out because of it. Perhaps you’re right in that more time does need to be observed to see trends in downloading, but currently the trends are for at least half the potential online revenue to be lost.

Good post Cabalamat

This also has to do the mis-selling of broadband by the ISPs as ‘unlimited’. Illegal content is not the only thing being transferred by P2P and its ‘illegality’ is a convenient fall guy on which to blame the inadequacies of their crappy services. This really kicked off with the BBCs iPlayer and suchlike – all legal P2P services. Consumers are actually beginning to use their ‘unlimited’ broadband and finding it well short of the promises from ISPs – which now consistently slow and throttle connections, cap download limits, etc etc. Hardly the ‘unlimited’ nirvana most people have been sold and expect. OFCOM???

A broadband tax also seems to be another creative way to pimp money from consumers, along with the likes of BT’s partnership with PHORM and other companies that want to harvest your data-use at the meta level of the ISP. I too wonder who’s ‘fruit and flowers’ Lord Carter is the recipient of lobbying for a tax such as this. Music industry anyone?

The Register (http:..theregister.co.uk) has been covering this sunject and data-pimping extensively, start by doing a search for ‘unlimited+ISP’ on their site.

One thing: “Another safeguard against fraud is that all CCFs would be monitored by the relevant government department.” Yeah, right…

Music just has to deal with it. It’s not the government’s role to enforce the collection of royalties, and such a tax would be a disaster (as the industry found in Canada), as there would be an effective open-season on P2P. Why not download as much copyrighted material as you can, after all, you’ve already paid for the privilege?

As the original article suggests, newspapers and news gathering has had to evolve to the new methods of content distribution. And yes, there has been blood on the carpet.

The lack of foresight shown by the record industry goes all the way back to Napster. Napster and the industry sat down and thrashed out a deal on subs-based distribution, and rather than grasp the nettle, the execs walked away and decided to destroy Napster (as it was then). The rest is history.

The truth is that bands don’t need a record label. They can get exposure on MySpace, and distribute their content via the net (and collect payment). This is the real revolution. And I’m sorry if many a pony-tailed wanker loses his job – welcome to the world the rest of us live in.

I remember the days of £17 music CDs. They took the piss for long enough.

“and such a tax would be a disaster (as the industry found in Canada)”

How was it a disaster?

Sorry, should say “could”, not “would”.

Anyway, in Canada, the defence of several cases of illegal copying prosecutions were based on the fact that people had paid a tax on blank CDs, and thus had paid for the right to reproduce copyrighted materials.

In 2007 the Canadian Recording Industry Assoc. filed a lawsuit to repeal the law, as they realised they’d struggle to enforce copyright law in the future.

If I pay a levy because I may file-share, I can surely go ahead and get my money’s worth, no? How can the industry claim a loss of earnings when they’ve already been compensated. Yeah, it’s simplistic, but as we saw in Canada…

“If I pay a levy because I may file-share, I can surely go ahead and get my money’s worth, no? How can the industry claim a loss of earnings when they’ve already been compensated. Yeah, it’s simplistic, but as we saw in Canada…”

But the point would be you reform the way business is done, there would be no loss of earnings.

The only thing on this matter I can see as a negative for a tax like this is that it puts a cap on the funding that is available to musicians and so the potential for growth is limited. But given the initial values people talk about are already around or in excess of what the industry currently makes that argument isn’t present in the short term.

Realistically it’s got to be done in conjunction, as some have said, with a reform of IP law.

The only thing on this matter I can see as a negative for a tax like this is that it puts a cap on the funding that is available to musicians and so the potential for growth is limited

What about yet another tax, the user being compelled to subsidise failing business models, and the user being punished for the actions of a minority?

“Perhaps we should also tax digital cameras and give the money to Kodak.”

My point is that the peceived threat to the music industry has been caused by the advance of technology- in particular P2P file sharing. In principle, P2P is no different to copying a cassette tape or recording Top of the Pops on a reel to reel but technology means that the scale is much greater and it has made enforcing copyright well nigh impossible.

We seem to be moving to a tax and subsidy culture but the solution for the music industry, as it always is in such circumstances, is to adapt to the new reality. To have to do so might even be good for it.

Taxing the technology to provide a subsidy is not an acceptable response.

“What about yet another tax, the user being compelled to subsidise failing business models, and the user being punished for the actions of a minority?”

I’m amazed that people aren’t able to look at the term tax without even being able to comprehend the positive elements. This wouldn’t be about propping up a failing industry, not if done correctly, it would be about providing a social fund for music (from my perspective) that would give support and resources to individual musicians to record and produce their music. It would actually actively encourage P2P sharing as the word of mouth is far more valuable when it comes to gate sales and other aspects of a bands commercial life. I’m with Aaron (I think) if he thinks the time of the record labels is over.

“We seem to be moving to a tax and subsidy culture but the solution for the music industry, as it always is in such circumstances, is to adapt to the new reality. To have to do so might even be good for it.”

It can’t adapt, it failed to do so at the napster phase and as such it has truly cut it’s own throat. There is nowhere for the industry to go except to cling on to retail as hard as they can while boosting revenues from merchandise, advertising, endorsements and gigs.

“What about yet another tax, the user being compelled to subsidise failing business models, and the user being punished for the actions of a minority?”

I’m amazed that people aren’t able to look at the term tax without even being able to comprehend the positive elements.

Oh, I comprehend them. I’m sure it would be very positive for other failing business models to be subsidised too. I was merely responding to your comment that you could only see one negative.

Well there is only one negative that I can see, and the negative you raise doesn’t actually apply to my thinking. Apologies if I jumped off the deep end on you though.

http://www.dklevine.com/general/intellectual/against.htm

Excellent book calling for the end of IP law. It puts forward compelling answers to show that abolishing copyrights, patents etc would be beneficial rather than disastrous.

“This wouldn’t be about propping up a failing industry, not if done correctly, it would be about providing a social fund for music (from my perspective) that would give support and resources to individual musicians to record and produce their music.”

Since when was it the government’s job to prop up musicians? What have they done to deserve special treatment? If they can’t adapt to the rise of broadband without government help they can go under.

@16 Nick: I think we should abolish all intellectual property laws and NOT use a dodgy state apparatus to funnel money to alleged artists or intellectual workers either. In areas where individuals need compensation for their work, systems of funding will emerge naturally in the absence of coercion.

There are two issues here:

(a) Is the system I’ve proposed better than a broadband tax that just went to the record companies (or for that matter, better than the current TV license)?

(b) Is the system I’ve proposed better than letting copyright fade way (copyright laws are becoming unenforceable; it’s therefore not particularly relevant whether they are formally abolished)?

I presume we both say “yes” to (a). Where we differ is over (b) where you say “no” and i say “maybe”.

Digital copies of information can be made and transdported round the world with zero cost, and preventing people from doing so is impossible without shutting down the net. Thus in economic terms they are non-rivalrous and non-excludable, and are public goods which because of the free rider problem tend to be under-produced, that is, produced in quantities less than that which would maximise total utility.

(BTW, if any of the commenters who’ve opposed my proposal don’t understand the argument I’ve just made, I suggest they read up on economics, starting with the links in this comment. I suggest this because (i) if you don’t understand economics, you will never have anything useful to say on these issues, and (ii) I am too lazy to explain it all to you myself).

@22 Aaron: Anyway, in Canada, the defence of several cases of illegal copying prosecutions were based on the fact that people had paid a tax on blank CDs, and thus had paid for the right to reproduce copyrighted materials. If I pay a levy because I may file-share, I can surely go ahead and get my money’s worth, no?

I agree 100%.

@23 Lee Griffin: The only thing on this matter I can see as a negative for a tax like this is that it puts a cap on the funding that is available to musicians

No it doesn’t. Firstly the proportion of the braodband tax that gores to musicians can vary quite widely; if musical CCFs succeeding attracting a wider share of the proceeds, musicians may get more income because of that.

But secondly, and more importantly, it doesn’t prevent musicians getting money in other ways. E.g. touring, merchandising, product endorsements, etc. It doesn’t even prevent musicians from earning money by selling digital downloads of MP3 (which even today are basically seen as a voluntary donation to the musician).

And if someone still can’t earn a living as a musician? Tough. They can do something else for a living — the world doesn’t owe anyone the right to earn a living doing a particular job.

and so the potential for growth is limited.

The potential for growth in taxation *should* be limited.

“Thus in economic terms they are non-rivalrous and non-excludable, and are public goods which because of the free rider problem tend to be under-produced, that is, produced in quantities less than that which would maximise total utility.”

You could say exactly the same thing about a new set of dance moves. Someone invents a new set and, all of a sudden, people start copying them. Someone uploads a youtube video of someone dancing it with some guidance and everyone round the world can suddenly watch it or copy it for themselves. Or jokes! How the hell is it that I can invent a joke, tell it to someone, and then they can go around telling anyone they want making them laugh. My joke is a public good and I need compensation for the fact its not excludable! As we all know, there is a tremendous lack of choreographers and comedians as a consequence.

I don’t think there is any lack of music in this world. In fact, it takes a fairly extreme government crack down to stop it being played. People don’t need the government to create an artificial incentive to produce it. I know people who make it obsessively already and offer it for free and with very little hope they will ever be paid for it, or work on the basis of live music gigs. Obviously, there stuff isn’t of the best quality (though usually a damn sight better than the music a lot of people pay for), but good quality music could pay for itself so easily (through voluntary support/donations, live music performances etc..) that I don’t see a utility maximising need to encourage. There are plenty of musicians already.

@26 Lee Griffin: This wouldn’t be about propping up a failing industry, not if done correctly

I agree. If done incorrectly — for example a broadband tax that just shove money towards the music indsitry fatcats — it would be harmful to the public interest.

it would be about providing a social fund for music (from my perspective) that would give support and resources to individual musicians to record and produce their music.

It would be about that, and more. I’m sure there would be music CCFs who operate on the grounds yuou suggest. And there would be other CCFs, that would encourage other forms of content (audiovisual works, written works, software, etc)

It would actually actively encourage P2P sharing as the word of mouth is far more valuable when it comes to gate sales and other aspects of a bands commercial life.

Yes.

I’m with Aaron (I think) if he thinks the time of the record labels is over.

I agree. Incidently I was discussing this today with a friend who thinks record labels will still have a role. Maybe they will, but in any case they will (and should) have to adjust to the new reality to survive and prosper.

@29 Richard: Excellent book calling for the end of IP law. It puts forward compelling answers to show that abolishing copyrights, patents etc would be beneficial rather than disastrous.

I wouldn’t go all the way in abolishing intellectual property altogether, but yes it does need to be reduced in scope.

What’s the betting that (1) the broadband tax would not be hypothecated, (2) that the money would not be distributed efficiently or fairly, and (3) that because the worthiness of culture is very subjective there will always be complaints that my favourite artist has not received enough money and my least favourite artist has received too much!

, it would be about providing a social fund for music (from my perspective) that would give support and resources to individual musicians to record and produce their music. ~ Lee Griffin

Oh, er… no.

It no longer takes a great deal of resources to create, record and promote music. I’d like to see the current structures dismantled. Entirely.

I pay for music. I buy records from obscure West Coast indi bands (yeah, I’m cool) that I find via blogs and MySpace. They don’t need a record label nor a social fund.

“It no longer takes a great deal of resources to create, record and promote music. I’d like to see the current structures dismantled. Entirely.”

so would I, I don’t think that the idea of tax stands in the way or otherwise of that fact. I’d support a music tax for the same reason I support the BBC license fee.


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