On tax breaks, public subsidies and community networks.

The UK government has recently decided to suspend the application of tax breaks to community benefit societies. A full description of what happened is reported here. I am neither an expert nor passionate of fiscal matters, but I would like to share some thoughts about the impact of this decision on community broadband networks.

Tax breaks have been quite useful to support community broadband networks in the UK (and in Spain, too). They offer a financial incentive for local investors and often represent the only support from public sector to these initiatives. Suspending the application of tax breaks may discourage local communities from investing in their own networks, although the need for fast broadband may be stronger than any fiscal incentive. 

I must say that the UK government, on its website (updated just 2 weeks ago) admitted that “the Enterprise Investment Scheme, Seed Enterprise Investment Scheme and Social Investment Tax Relief (known as EIS, SEIS and SITR) are well suited to raising funds for investment in broadband schemes”. Then I hope that the government will reintroduce some sort of tax breaks in favour of community networks, once any fiscal or legal issues will be sorted out.

Unfortunately I have read somewhere online that the government is thinking to replace tax breaks with direct subsidies. Whether this is just rumours or not, I feel the need to share some insights from my research on community networks (see here and here for my latest papers on this topic).

Public subsidies are not necessarily the best solution for community networks.

Under the current regulatory regime, the use of public funding entails a number of administrative requirements that local communities are most likely unable to deal with.

Furthermore public subsidies are at odds with the ethos of community networks. The success of these initiatives depend on their ability to mobilise local resources and encourage people to share their time or money to build a cooperative network. Public subsidies make it easier to launch such projects but may undermine their sustainability in the long term.

As communities no longer need to raise funding and invest their own money, they have little incentive to engage in the roll-out or get involved in the project. However, the engagement of local communities not only favours network investment: it also raises interest and encourage demand for broadband services, thereby ensuring a stable customer base to the network.

Community networks have been on the scene for more than 15 years. Lots of these initiatives just relied on public subsidies and then failed because unable to become economically and financially sustainable. Projects like B4RN in the UK and Guifi.net, instead, have proved that community networks can be sustainable, if local communities effectively engage and contribute to the projects. 

If the government is willing to support these initiatives, there are plenty of actions to put in place. Public subsidies are not necessarily the solution, but may become part of the problem!