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UK ISPs Virgin Media and Cityfibre Complain of Quadrupling Fibre Tax

Friday, June 17th, 2016 (8:37 am) - Score 1,343
fibre optic cables from above

Broadband providers Virgin Media and Cityfibre have complained that a change to the Valuation Office Agency’s (VOA) business rates (charges) for their network assets (e.g. any fibre optic cables that they put into the ground) is hitting them with a massive Fibre Tax hike.

Long-time readers will know that the debate over business rates for new broadband infrastructure is nothing new to these pages and often stems from the fact that the VOA seems to adopt a different approach for different operators, with smaller alternative network ISPs often calling for a level playing field.

The VOA generally sets its business rates (charges) using a complicated system of either revenues and costs (e.g. BT pay tax based their profits (arrears)) or via one that looks at how active a network is. In the past smaller providers have paid tax almost as soon as a fibre optic cable becomes active (lit), which ignores whether or not they actually make any money from it.

However imposing a significant hike in charges, which comes at the same time as major operators are moving to spend billions on improving their network coverage, could risk damaging the roll-out of new broadband infrastructure.

Brigitte Trafford, Virgin Media’s Chief of Corporate Affairs, said (FT):

“The Valuation Office Agency’s proposed quadrupling of the rates Virgin Media pays on its network assets is a real kick in the cabinets at a time when ministers are calling for more investment in broadband — a call we are answering to the tune of £3bn. [The VOA] should reconsider its modelling to ensure broadband providers are treated proportionately and incentivised not penalised for building infrastructure that supports the UK’s digital future.”

Mark Collins, Cityfibre’s Director of Strategy, said:

“The system favours scale and size and BT can pass on its costs to customers through wholesale charges. If the government is trying to encourage fibre investment and competition, then we should not be taxed in a way that proves to be a disincentive. It is clear that reforms to the rating system must be implemented urgently.”

At this point it should be said that BT are also facing a potential hike in their charges and the matter is currently being debated as part of the VOA’s national revaluation of business rates. However if history is anything to go by then the VOA may not dramatically shift their position, with the Government also tending to prefer small tweaks instead of major overhauls.

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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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12 Responses
  1. Avatar DTMark

    And so the joined-up thinking continues. Ever seen a beetle on its back? 🙂

  2. What is the total revenue raised from this tax?

    • Avatar Henry

      In total, local authorities in England collected about £23.5 billion in 2015-16 in national non-domestic rates. This figure does not include BT or many other privatised utilities, who have to pay direct to the Treasury.

  3. Avatar GNewton

    The fibre tax should be abolished altogether, much better for the broadband investment climate than the BDUK could ever be!

  4. Avatar fastman

    Gnewton — really

  5. Avatar ed-vaizey-could-do-with-a-kick-in-the-cabinets

    It has been suggested that BT receive an unfair competitive advantage as a result of the VOA’s use of an alternative mechanism to calculate the ‘cumulo rates’ payable for their fibre assets, the best summary of the issue I have seen is here:

    https://br0kent3l3ph0n3.wordpress.com/2013/09/13/how-bt-scores-in-the-fibre-rates-wars/

    The European Court’s dismissal of the legal challenge brought by Vtesse had mostly seemed to put this issue to be; however it will be interesting to see how the “potential hike in their charges” faced by BT compares to that faced by operators who do not have a special arrangement with the VOA 😉

  6. Avatar FibreFred

    Lol just dump £26 billion GNewton? Are you running for an election?

    • Avatar Steve Jones

      He was proposing dropping only the business rates tax on fibre networks, not the entire business rates revenue (which is where the £26bn figure comes from). The former figures will be a relatively small fraction of that.

      Business rates are (at least nominally) related to the rentable value of fixed assets. It’s rather tricky to work out what that might be with fibre as the nominal lease prices for a circuit include a whole bunch of services and thoe lease prices are constantly declining.

    • Avatar GNewton

      @Steve Jones: Because of applying a business fibre tax which falls most heavily on those trying to innovate round the edges of the incumbent operator, competition is being stifled and the pace of Digital Britain is being slowed. The overall investment environment for fibre needs to be improved. A fibre tax does the opposite.

      We might as well tax windows again which seemed like a good idea to some in late 17th century England 🙂

    • Avatar Steve Jones

      @GNewton

      Treating fibre as different to other fixed/plant assets for the purposes of business rates is not something I’d favour. There are many others businesses that can also claim special importance to the health of the economy.

  7. Avatar a-tax-on-light-and-leath

    “We might as well tax windows again which seemed like a good idea to some in late 17th century England”

    Ahh yes, the still-visible bricked up windows from this period are one of the few things that are even less transparent than the means by which BT’s dues under its modern equivalent fibre tax!

    Perhaps as with the benefits system reform the powers that be could simplify things by replacing this with a universal glass tax..

    ie regardless of whether its the round thin type used in fibres, flattened out to make windows or used to store liquids in.. if you can afford either you can clearly afford to pay some more tax!

  8. Avatar fastman

    gnewton so are you covered under Commercial programme, BDUk or not at all

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