Britain is to provide universal broadband access by 2012 and plans to use a tax to fund superfast connections, it said on Tuesday as it outlined its digital vision requiring the BBC to share some funding.
The BBC receives a 3.6 billion pound ($6 billion) license fee -- a tax on every television-owning household -- which has never previously been shared and it has indicated it will strongly object to any plan to reallocate this cash.
But Communications Minister Stephen Carter said some 200 million pounds of direct funding needed to be spent to extend basic coverage to the 15 percent of homes which do not currently receive broadband at 2 Megabits per second.
The majority of the 200 million pounds will come from money given to the world-renowned and publicly funded BBC. The money was previously ring-fenced to help elderly people switch from analog to digital TV and has not been used.
The government also plans to impose a levy of 50 pence a month on all copper phone lines, which could raise up to 175 million pounds to introduce faster broadband to areas where it would not be commercially viable for private investment.
BT Group is expected to take a leading role in the broadband expansion through a range of existing technologies.
It is important that the Government finds ways to encourage investment in superfast broadband, particularly in the parts of the country where the economics currently do not work, BT Chief Executive Ian Livingston said.
Today's report recognizes this and Lord Carter should be praised for offering a creative solution.
Prime Minister Gordon Brown said Digital Britain was about giving the country the tools to succeed.
Investing in areas such as broadband access for every home and business and the move from analog to digital technology will bring benefits across the board, driving growth, enabling businesses to thrive, and providing new opportunities, Brown said.
The proposals were one of many plans outlined in the Digital Britain report, which also outlined a range of proposals to help broadcasters hammered by the advertising downturn and the move to digital TV.
Carter's report said it would support a commercial partnership between the niche broadcaster Channel 4, which is publicly owned but is funded by advertising, and BBC Worldwide, the commercial arm of the BBC. Channel 4 welcomed the report.
The BBC's surplus money could also go to companies willing to provide regional news for commercial broadcasters such as ITV, which have said they can no longer afford to make it.
The report said money from the BBC surplus could go to pilot schemes on regional news between now and 2012 and, if successful, the solution could be confirmed when the BBC renegotiates its next license fee settlement in 2013.
The BBC however said it strongly opposed such measures.
The license fee must not become a slush fund to be dipped into at will, leading to spiraling demands on license fee payers to help fund the political or commercial concerns of the day, said Michael Lyons, chairman of the BBC Trust.
Carter began preparing his report last year to examine how the country can boost the digital and communications industries, but with the recession firmly rooted in Britain there was little public money to invest.
On the subject of Internet piracy, the report said it would support sending warning letters to those making illegal downloads of content such as music and films.
For repeat offenders, the body could also slow their Internet connections and consider some Internet blocking.
(Editing by Paul Hoskins and David Holmes)