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UK Gov Consult on 5 Year Tax Break for New “Full Fibre” Broadband Networks

Wednesday, August 30th, 2017 (11:40 am) - Score 3,264

The Government of the United Kingdom has this week started a new consultation on their proposal to introduce 100% business rates relief for new “full-fibre” (FTTH/P) broadband networks (estimated to be worth £60m), which will run from 1st April 2017 to 31st March 2022.

The Chancellor of the Exchequer, Philip Hammond MP, first unveiled the proposed tax break as part of last year’s Autumn Statement (here), although its introduction was stalled by the surprise 2017 General Election (hence being backdated to 1st April 2017) and thus it now forms part of the recently introduced Telecommunications Infrastructure Bill 2017-19.

The measure is naturally designed to complement the new £400m Digital Infrastructure Investment Fund (DIIF), which was also reannounced last month and aims to help support many of the same ultrafast “full fibre” networks as those proposed by the above bill (here). Not to mention the £200m that was set aside in the 2017 Budget for “local projects to leverage private sector investment in full-fibre broadband networks” (here).

Naturally the Government wants to introduce the change ASAP and thus the bill is very short, focusing almost entirely upon the proposed tax break. Similarly this week’s new consultation will only seek views on how the draft regulations should implement this relief and NOT the policy of the relief (e.g. who should be eligible for the relief, when it should apply or for how long).

Matt Hancock MP, Minister of State for Digital, said:

“Full Fibre is the gold standard for fixed broadband connectivity. It will ensure our digital infrastructure supports the UK’s world-class digital economy.

We have created a £1.1 billion package of measures to support market delivery of digital networks underpinned by full fibre, including £200 million to support local bodies in the roll out of full fibre networks in their area. Also, in July 2017 we launched a £400 million investment fund, providing finance for network providers to match in their fibre investments.

We have made progress in extending superfast broadband coverage. Public funding of £1.7 billion has resulted in over 93% of the UK covered to date, and we are on target to reach 95% by the end of the year.

Following on from this investment, we want to create an attractive environment for private sector providers to increase their roll out of fibre connectivity. We have therefore introduced in this Parliament specific legislation to allow business rates relief on new fibre deployment from 1 April 2017. This measure will support all providers who deploy new fibre increasing competition and helping the roll out of 5G. We are keen to ensure the measures are as effective as possible, and so we are launching this consultation on the detail of the regulations. We look forward to receiving your views.”

The consultation notes that this “relief will only be available on new fibre,” which is much as we expected. However it’s interesting to note that the Government had initially invited some Fixed Wireless Broadband ISPs to related meetings, although this is perhaps because some of them may also need to feed their new sites with fibre (not unlike the expectation for 5G mobile operators).

Sadly the use of existing unused fibres (known as Dark Fibre) won’t be eligible, unless of course the fibre itself is a completely new deployment built after 1st April 2017. “The regulations limit the relief to fibre which is part of the hereditament and was not laid, flown, affixed or attached before 1 April 2017. This will ensure that previously dark fibre which is lit after 1 April 2017 will also be excluded if it was laid, flown, affixed or attached before 1 April 2017,” said the Government.

The consultation (PDF) will run until 11:45pm on 21st November 2017 and this document currently only applies to operators’ in England, although the bill itself does include Wales too. Unfortunately none of this will help operators with the huge business rates tax hike that is hitting their existing networks (the hike itself will cost some operators significantly more than the predicted benefits of this relief).

UPDATE 31st August 2017

We’ve had a comment from Gigaclear.

Matthew Hare, Chief Executive of Gigaclear, told ISPreview.co.uk:

“We fully support new proposals for 100% business rates relief on the installation of new fibre broadband. It shows the government is taking seriously the challenge of future proofing the UK’s digital economy.

Such a scheme provides the incentive needed to extend full fibre rollout across the country, particularly for those providers that are already investing in bringing broadband to areas such as rural communities that are saddled with poor infrastructure and second-rate connections.

Guaranteeing business rates relief for five years will also give the government time to review the wider process of rating fibre and create a fairer mechanism of valuing different provider’s assets.”

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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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37 Responses
  1. Optimist says:

    I can see no reason why utilities should have to pay tax on their infrastructure in any case (as long as they reinstate road surfaces etc. after installation / repair).

    The government’s revenues goes up anyway as more customers sign up and VAT receipts increase.

    1. MikeHunt says:

      But muh socialism?

    2. wirelesspacman says:

      I think you are missing the point Optimist – why tax once when you can tax 12 times? 🙂

    3. call-me-a-cynic says:

      Only because they have yet to develop a practical method of taxing the air we breath…

    4. Steve Jones says:

      The same could be said about shops, factories, oil refineries or anything else involved in the value creating chain. The fact is that, unless state expenditure is reduced, tax has to be raised somehow and creating large holes in the income stream hoping that it can somehow be gained somewhere else is wishful thinking.

    5. Optimist says:

      Taxing infrastructure makes no sense if that means the infrastructure doesn’t get built. Then the government says “Ooh we must encourage broadband deployment” in order to get votes so gives a bung if taxpyers’s dosh to get it built!

      It then recoups the money by charging VAT on broadband services (at a far higher rate than is charged on other utilities such as electricity) which, as all customers are on a budget, means less money going to the ISPs.

      Simpler idea, bring down the tax rates and leave broadband provision to the free market, thus reducing overall costs as the administrators to dole out the subsidies are no longer needed.

      At least a the suspension of the infrastructure tax is a step in the right direction, but it could all go pear shapled in 2022 when the tax holiday comes to an end.

    6. There is a hidden cost for non BT
      Fiber laying co’s : municipal taxes for
      diging trenches. BT was allowed by the
      UK govt to buy these off in one amount
      for the whole country. This puts non BT co’s
      at a big disadvantage when offering to
      install fttpremises. And BT is not eager to
      roll out fiber unless threatened. The
      municipalities complain about lacking
      broadband links, but in essense block
      it themselves by their greed to make
      money (precario tax) from it.

    7. Steve Jones says:

      @Jaap Van Till

      I am not sure what you are talking about, unless it is the charges for temporary road closures. Those aren’t really for revenue, but more about administration costs and a disincentive to close/restrict roads and paths. Even existing infrastructure operators are not immune as it’s often necessary to apply for the required permits for maintenance work where a road or path closure is required and it will cause significant obstruction. Of course this does affect construction costs, but obstructing traffic is also deemed to have an economic cost.

      Of course there will be business taxes on the resulting infrastructure, but that’s also true for existing BT or VM infrastructure (or any other utility for that matter).

      The term precario tax appears to be Dutch and, from context, it does seem to include an element for occupying municipal territory (including underground). As far as I’m aware, there is no equivalent in the UK for public land, although there is for private (called wayleave charges). Business rates are a different matter – they are charged against some notional rentable value of property and infrastructure whether on private or public land. As mentioned, those charges are applicable to all infrastucture, new or old.

  2. Robin says:

    B T have had over a decade to do all this work and have done as little as possible,they could have fibred the whole country in that time if they had any sort of sense of urgency.
    Time Mrs May had a little chat with their board on the subject of retaining their monopoly as a PSO,or not…….
    R

    1. GNewton says:

      The techradar site doesn’t tell the full story. The ban on BT to do TV was lifted in January 2001, and for many years nobody has prevented BT from doing fibre.

    2. CarlT says:

      Give or take Ofcom.

    3. MikeW says:

      Ofcom’s limitation lasted until, what, 2009? Not allowing any superfast NGA tech until after VM had already started their 50Mbps products.

    4. GNewton says:

      @MikeW: Do you have links or sources showing that BT was actively banned from doing fibre before 2009?

    5. MikeW says:

      @GNewton
      There were a lot of consultations run by Ofcom in the mid-noughties on the topics of “next generation networks” and “next generation access”, to determine the way in which Ofcom could rig the upcoming market to keep BT’s market share low. Ofcom were, of course, keen to keep the LLU market supported at the time, as their flagship mechanism.

      The core of the restrictions come down to the “BT Undertakings” that Ofcom agreed when Openreach was created.

      I suggest a google on such matters, as having a “next generation network” core is a prerequisite to carrying any volume of TV traffic, and a “next generation access” network to distribute it to end users.

      Some of this is highlighted in Ofcom’s “Impact of the Strategic Review of Telecoms” from May 2009:
      https://www.ofcom.org.uk/__data/assets/pdf_file/0029/33896/impact_srt_fulldoc.pdf

      That mentions the following:

      1.38 … the Undertakings make no explicit provision for next generation access (NGA). However, we have published two consultations on NGA that were separate to the Undertakings

      That section references the consultation that was launched in March 2009, as a culmination of their previous efforts. It was this final consultation that was specifically to alter Ofcom’s agreement with BT: those “BT’s Undertakings”

      Here are some pertinent quotes:

      1.38 BT’s Undertakings require BT Openreach to provide passive products on today’s copper based access network …

      1.39 Today, in super-fast broadband, there appears to be more significant interest so far in active products. …

      1.40 … we are therefore consulting on a proposed variation to BT’s Undertakings.

      The proposed Variation would allow Openreach to control and operate the electronic equipment required to deliver fibre-to-the-cabinet wholesale products. …

      https://www.ofcom.org.uk/__data/assets/pdf_file/0018/59121/statement.pdf

      This document focuses on FTTC; between the two documents there is a tacit understanding that FTTC was the affordable way forward at the time; mention of FTTH was restricted to “new builds”, and as such was handled in a separate consultation in 2008.

    6. GNewton says:

      @MikeW: Thank you for the links. However, where exactly did you find that BT wasn’t specifically allowed to do FTTP? I understand Ofcom’s pressure on BT to keep copper for LLU purposes. Yet BT could have easily put pressure on Ofcom/Oftel by doing full fibre back then. Ofcom certainly has its share of mistakes, but it is not the only one!

    7. MikeW says:

      Remember to see the “permission to do fibre” in the context of that strategic review, and the undertakings.

      The final consultations that pointed to “interest in active products” were the culmination of a lot of work on ALA (active line access) that went on to. Essentially, trying to model a way to bypass physical unbundling products with ALA products.

      Anything to do with fibre – FTTP, FTTC or any NGA – really balanced on top of the ALA discussions.

    8. MikeW says:

      In a business sense, why would BT start rolling out FTTP in order to put pressure on Ofcom about FTTC? Which was what they really wanted to do, given their existing network?

      With ALA discussion up in the air, you couldn’t really define a strategy. Without a strategy, you can’t determine a balance between FTTC and (5x the expense) FTTP. Why start at all?

    9. MikeW says:

      There is no simple answer.

      Beyond that, I can only recommend you google for the bigger picture, relating to Ofcom’s position on that strategic telecoms review, the undertakings, NGN (and 21CN), NGA and ALA. Read some consultations. Browse some of the responses – especially from Sky, TalkTalk, Cable & Wireless etc. (this is a key part)

      Any decisions on FTTP have to be seen in the context of a very complicated playing field, where some players were very keen to make sure that BT didn’t just do their own thing without restriction after restriction.

      The nature of that battle over regulation, once you’ve looked enough, tells you that BT can never do *anything* without firm oversight and agreement from Ofcom, and with disagreement from almost everyone else.

      Again. There is no simple answer.

    10. TheManStan says:

      @GNewton

      The legal instrument by which the restrictions has been set aside with is the Enterprise Act 2002. Which is why we see the undertakings by KCOM and BT referring to this legislation and nothing else. I would hazard a guess that the telecommunications act 1984 gave powers to OFTEL and those were repealed, not the Communications Act 2003.

      Despite recommendations from the select committee for Trade and Industry that an announcement of the removal of the restrictions be made in advance by the Director General of Telecommunications (OFTEL)/sic UKGOV… none happened that are on public record (trust me I’ve had a very good look).

      https://publications.parliament.uk/pa/cm199697/cmselect/cmtrdind/254iii/ti0307.htm#n47

      See section 17

      Also, in the report:

      In 1997 BT stated that at the point that Government announced it’s intentions to raise the restriction on simultaneous broadcast there would be 3-4 years before implementation of technology solutions.

      i.e. BT could not and would not invest money in research of the whichever current technologies without that announcement. This is a legal duty imposed on company directors, 2 fold, first spending money for no reason (not to the benefit of the company nor shareholders) and secondly to act within the “companies constitution and powers”, do what the company is allowed to do. i.e. If there was an announcement, then BT could legitimately begin “trials” on a product they currently could not provide through regulatory restriction.

      https://www.ofcom.org.uk/research-and-data/telecoms-research/broadband-research/oftel_internet_broadband_brief

      Interestingly, an OFTEL brief from 2003 (it’s last year), describes bypass of 80’s fibre for telephony for BT customers… if BT did have permission for FTTP immediately after 2001/2002, then one could reasonably expect for OFTEL to make clear that that BT had chosen not to provide FTTP via existing infrastructure to consumers, but ADSL instead.

      https://www.ofcom.org.uk/research-and-data/telecoms-research/broadband-research/oftel_internet_broadband_brief

  3. John says:

    BT started out with a monopoly of telephony and despite having had a huge start lost market share. They failed completely in mobile and had to pay a huge premium to buy in via EE.

    Having destroyed their phone franchise through dire service, they still held the monopoly for the line infrastructure. Thank goodness other companies are now laying fibre: meanwhile BT still cheat by leaving copper in fibre solutions and they deserve to lose here too.
    And they can’t even maintain their pension fund.

    Worst company in the UK and beyond.

    1. MikeW says:

      Ofcom’s target is that BT has as low a market share as they can force. It is promoted as a measure of their “success” in comparison with European countries.

      It doesn’t matter how successful BT could be, Ofcom will find a way to undermine it.

    2. alan says:

      Or to sum up BT and its advocates. It’s easier to blame others for your shortcomings than it is to take responsibility for them. It’s easier to blame than admit you’re not that good. It’s easier to blame than it is to improve. It’s easier to blame than face your own reality.

    3. MikeW says:

      Easier to lambast than understand

    4. Peter says:

      John
      I suppose you do remember how bad BT in its former status as the publicly owned GPO was?
      My phone used to be off for a couple of weeks due to a fault – now its a couple of day.
      Compared to those days BT of now is a vast improvement.

      BT could easily improve its pension fund’s situation – by making additional contributions paid for by their customers by increasing their prices significantly – but you probably would not like that…..

    5. Optimist says:

      Peter is right, I actually started work in IT at what is now BT, but then the General Post Office and part of the civil service, 50 years ago!

      Customers could only rent equipment from the GPO from avery limited range, so records had to kept on the type of phone(s), colour, whether it was a payphone etc. management were paranoid that a customer might attach unauthorised equipment the line – I suppose they were worried the system would blow a fuse. I can’t recall if there were faxes then but if there were you’d have to rent them from the GPO. If you wanted a phone there was a lengthy wait of months if not years, esp. in areas of number shortage.

      I escaped after two years and a decade or so later BT was privatised, people could buy their own equipment, competition was introduced and waiting times came down.

    6. GNewton says:

      @John: BT is indeed rated as one of the worst compnies on Trustpilot and many other major review sites. Part of the issue were also wrong government policies and Ofcom, the BDUK waste is just one of many examples.

    7. alan says:

      “Easier to lambast than understand”

      And you do it very well towards Ofcom with your blame.

      Much like BT your desire to change must be greater than your desire to stay the same.

      I suppose Ofcom are also to blame for the near 8 years its been since BT failed at this figure…
      http://www.ispreview.co.uk/story/2009/10/09/bt-doubles-next-gen-uk-ftth-broadband-rollout-and-reveals-more-detail.html

      Perhaps when BTs passion and purpose is greater than its fear and excuses it will find a way.

    8. MikeW says:

      I don’t blame Ofcom without thought and understanding. And I blamed Ofcom of nothing in this thread; I simply described its raison d’etre.

    9. alan says:

      “I don’t blame Ofcom without thought and understanding.”

      Which means you do blame them.

      “And I blamed Ofcom of nothing in this thread; I simply described its raison d’etre.”

      Really… “It doesn’t matter how successful BT could be, Ofcom will find a way to undermine it.”

      That seems to be blaming Ofcom for limiting BTs success.

      Again are Ofcom to blame for the near 8 years its been since BT failed at this figure…
      http://www.ispreview.co.uk/story/2009/10/09/bt-doubles-next-gen-uk-ftth-broadband-rollout-and-reveals-more-detail.html

      BT and advocates need to grow up rather than whine its not fair.

    10. MikeW says:

      Blame? No. Not in this thread. Explain? yes.

      As I said, I was describing Ofcom’s raison d’etre. Their whole existence is premised on preventing any one provider from having “significant market power”.

      Indeed their ability to regulate the market depends on their ability to define providers with SMP, and take steps to stop it.

      So, no matter who is successful, Ofcom’s entire purpose is to stop them being too successful. At the start of their existence (as Oftel), that “who” was, de facto, BT.

      The OP’s contention was that “BT started out with a monopoly of telephony and despite having had a huge start lost market share” and destroyed their franchise.

      My explanation is that Ofcom’s entire existence was to cause precisely that outcome. That’s not blame. That’s fact.

      And with that, once Ofcom’s finger was (legally) allowed to tip the scales, the definition of “successful” needed recalibration.

      Where I do assign blame to Ofcom? You’d better go and find some examples of what I blame Ofcom for. You won’t find me complaining about what they’ve done to BT’s retail share, or BT’s “success”. Not once. I don’t care about that.

      Once you learn that everyone has individual nuanced positions, you’ll learn that lazy epiphets such as “and advocates” just mark out lazy BT haters. What are you? Someone worthy of individual discussion? Or just a lazy hater? The latter option is leading the race right now.

    11. alan says:

      BT and your position in less than 5 minutes…
      https://www.youtube.com/watch?v=0XlzqVayvTc

      Hanging onto the blame and past is to do nothing more than cripple well being and will not aid change. BT have choices NOW but fear change, so project their blame.

      The last paragraph i have no need to address, it does not upset my emotional equilibrium. I recognise your anger as nothing more than a call for love.

    12. PaulM says:

      Oh that video is good and so spot on.

    13. MikeW says:

      You really can’t be bothered to read, can you?

      PMSL at the thought an amateur psychologist can diagnose me without bothering to listen.

    14. Alan says:

      “Listen” to the video and you will find its not an amateur. That is a doctor. Still at least you know something needs diagnosing.

      Catch you in another 5+ days when the anger has came to a boil, ill still recognise your anger as nothing more than a call for love.

  4. cheapskate says:

    Google not finding much but there was a chance FTTP may have happened in 1997 when BT tried to get newly elected labour to let them do video in return for uk wide fibre install. Nearest reference I can find is

    http://www.independent.co.uk/news/business/no-doubt-who-wins-in-labours-deal-with-bt-1576077.html

    Labour said no. All politics mrss up on technology

    1. PaulM says:

      1992 – 1998 was when Telewest were expanding and merging at rapid pace with other firms first rolling out their product in the Midlands and then London.

      The Labour government of that time was not the sharpest plastic knife in a picnic hamper but it appears they saw someone else was already rolling out a video service so there was no need for BTs overbuilding and attempted poaching like we have today.

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