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

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.