Europe - concerns over proposed French tax on broadband

EU Commissioner attacks Sarkozy's telecoms tax

A senior European Union executive condemned as illogical a plan by French President Nicolas Sarkozy to levy a tax on telecoms sales to fund the scrapping of advertising on public television and radio.

Viviane Reding, EU Telecoms Commissioner, told journalists in Paris on Thursday the proposal contradicted Sarkozy's ambition to make broadband available to all French people.

"One cannot wish to solve the problem of (low) broadband penetration in France and want to create a tax on broadband at the same time," Reding said. "I think that goes against any logic and I say it loud and clear."

Sarkozy's plan could hamper broadband penetration because it could lead to price increases, she said.

Sarkozy surprised operators in January by announcing the government was considering levying an "infinitesimal" tax on broadband and mobile sales to make up for a shortfall created by scrapping advertising on public television and radio.

France Telecom (FTE.PA: Quote, Profile, Research) Chief Executive Didier Lombard replied at the time that the French telecoms operator might have to change its model if such a tax were imposed.

Sarkozy's proposed media reform was partly behind the 20 percent drop in advertising revenue seen by France's state broadcasters in January and February.

However, his reform is also seen as a boon for private broadcasters such as TF1 (TFFP.PA: Quote, Profile, Research) and M6 (MMTP.PA: Quote, Profile, Research), as they would pocket the bulk of revenues lost by public channels.