UK government urged to tax digital TV

A report into the future funding of the BBC has recommended that the UK's digital TV users should pay an extra £23.88 per year in licence fees.

The independent review, commissioned by Culture Secretary, Chris Smith and chaired by economist, Gavyn Davies, concludes that a "small and temporary digital supplement" to the standard colour TV licence fee would be the best way to fund digital television on the BBC. The report will now go for public consultation, prior to a decision by Chris Smith in the autumn.

The panel recommends an increase of £1.99 a month next year, falling to 99p in five years time, and disappearing completely when analogue services are faded out.

Davies said the digital supplement "will not appreciably slow the take-up of digital technology, which depends far more on the up-front cost of acquisition of equipment and the switch-off date for analogue services".

The digital TV industry has united in opposition to the fee. A spokeswoman for Sky Digital - the digital arm of satellite broadcaster, BSkyB - said it would be "grossly unfair and completely unnecessary", and would hamper digital TV take-up. She said both BSkyB and its main rival, OnDigital, have made massive investments in digital TV - including giving away free set-top boxes - to get people to make the switch to digital.

The review also called for the Corporation's Internet division, BBC Online, to launch non-UK services accepting revenues from ecommerce and advertising. It also said the BBC's ad-based commercial Web site, beeb.com, should consider an injection of private capital.