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VOA Hints at UK Broadband Fibre Tax Cut for 2015 But Not for All ISPs

Saturday, June 29th, 2013 (8:21 am) - Score 2,730
fibre optic cable trench uk

The governments notoriously complicated and confusing Valuation Office Agency (VOA), which is responsible for taxing the rateable value of the basic infrastructure, has hinted that its next rate card update in 2015 could reduce the tax on rural fibre optic broadband lines for smaller (altnet) ISPs. Sadly there’s a big catch.

Smaller ISPs have historically claimed that the VOA’s “Fibre Tax” treats them unfairly by effectively forcing them to pay more for their fibre optic cable deployments than big fixed line Next Generation Access (NGA) providers like BT and Virgin Media. Despite some changes in 2011/12 (here), the key concerns have not gone away.

Sadly it’s not easy to go into the detail of this without later feeling the need to walk off the top of a high building, which should be taken as an accurate reflection of just how hard it is to get any kind of sensible explanation or detail on a proposal from the VOA. Suffice to say that the big infrastructure developers (BT) have traditionally been taxed based more on their profits than actual line activations, which works out a lot better for the big boys.

However an excellent article on Computing notes that the VOA are due to issue the next update to their fibre tax rate card in 2015 and one of the proposed changes is to effectively tax smaller ISPs in roughly the same way as BT and Virgin Media. It could also charge less for rural than urban areas. As usual this is still dependent on the VOA securing enough evidence from the relevant ISPs (i.e. INCA will have its work cut out).

The welcome change would effectively focus on the final third (i.e. 33%) of premises in the United Kingdom, which commercial operators tend to find economically unviable to upgrade. Related areas are only expected to gain access to a next generation superfast broadband connection with support from state aid (public funding).

Sadly this is also where the big catch comes into play because, in order to benefit from this new found miracle of a semi-level playing field, ISPs will need to be building networks using state aid supplied by the government’s own Broadband Delivery UK (BDUK) office. Yes, the one whose only viable bidder is currently BT. Everybody else dropped out a long time ago over economic and competition concerns.

But all may not be lost. This week’s 2013 Spending Review confirmed that BDUK will soon be given greater “operational freedom and an enhanced delivery focus, and will be equipped with the commercial skills it needs to deliver a broadband programme” into 2017 (here). This in turn seemed to be what earlier reports were talking about when the idea of spinning-off BDUK was raised (here).

The principal behind the new BDUK changes is to support a renewed focus on helping to upgrade the final 10% of predominantly rural areas during the 2015 to 2017 period. Many will be hoping that this opens BDUK up to smaller ISPs and without needing them to combine into a complicated and unworkable mass consortium. But critics fear it will just be another platform that ends up favouring BT.

In either case we expect a repeat of the same heated debates that accompanied the last fibre tax change.

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Mark Jackson
By Mark Jackson
Mark is a professional technology writer, IT consultant and computer engineer from Dorset (England), he also founded ISPreview in 1999 and enjoys analysing the latest telecoms and broadband developments. Find me on Twitter, , Facebook and Linkedin.
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9 Responses
  1. Avatar chris

    They walk amongst us. You couldn’t make it up. At least its a good sign that they’re trying?
    All we need is a few more people with common sense.

  2. Hehe in that case we’re probably better off asking Dolphins to take-over instead of modern politicians.

  3. Avatar FibreFred

    Sigh you couldn’t make it up.

  4. Avatar MikeW

    I agree that this should be seen in the context of BDUK, not as it exists today, but as continuing to exist as a tool to inject government funds until we get to those EU targets. And possibly until, eventually, we have fibre everywhere.

    Alongside this week’s announcement that more technologies can be considered for the £250m in the “next 5%” phase, this too seems to suggest that the government are happy for altnets to be involved now.

    We still have the problem that altnets don’t know which places are included in the 90% plans though, so don’t know where to supply.

    • Avatar FibreFred

      Yes it sounds like they want altnets to be involved but to be able to bid for BDUK funding your last two financial years must show a turnover/revenue of £20m+ how many altnets can boast those figures?

  5. Avatar Michael

    I am slightly bemused by the position on making BDUK more commercial. I think that at least 60% of its “staff” are private sector consultants – not civil servants. And don’t assume that civil servants haven’t worked in the commercial world – many have.

    The rules of the game are set by politicians, the funders (in Europe and UK), OFCOM and private sector service providers – entities like BDUK then have to get sane stuff to happen, satisfying all parties. Not an easy task.

    And with players like VOA in the mix, it isn’t easy to get a fair and balanced competitive landscape for infrastructure in a timely manner.

  6. Avatar David

    As I understand it, all VoA is doing is applying the law – the Local Authorities Finance Act in this case. Don’t blame them – blame the politicians who can’t or won’t see any problem. I also believe that Local Authorities have the power to waive the application of business rates (ie: the rate that VoA sets)and the only reason they don’t do this (in rural areas, for example)is because it would be seen as State Aid. OK – so isn’t that acceptable where the market has failed? As previous comments have said – you couldn’t make it up – and all we need is some common sense.

  7. I think Mark has hit the nail on the head – put Flipper in charge!

  8. Avatar New_Londoner

    There are really two linked but separate items here, confusingly covered under the same headline. These are the so-called “fibre tax” and the extension of fast broadband availability to even more of the “final 10%”, bearing in mind some BDUK contracts already take coverage well beyond 90% anyway.

    On the “fibre tax”, bear in mind the assertion that smaller ISPs are discriminated against has already been tested in the UK courts, as well as being the subject of an EU investigation, and has been thrown out in both cases. So whilst some feel strongly about this, the evidence has been examined thoroughly and it has been rejected. If there were to be any change in approach, it would be better to be open to all if the objective really is to encourage investment rather than to subsidise small ISPs.

    On the remainder of the final 10%, some assert that small ISPs would provide the best solution. It would be good to see some evidence to back this up, with clarity whether they mean in terms of cost, time to deploy, choice of service providers or whatever. I understood one of the biggest problems with smaller ISPs was a lack of capital to invest alongside our money as taxpayers, and must admit I rather like the idea that the provider is required to invest its own money too, rather than being funded 100% by us.

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