UK ISPs Virgin Media and Cityfibre Complain of Quadrupling Fibre Tax

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.