Concern as UK Full Fibre AltNets Risk Missing Out on Rates Relief UPDATE

Back in April 2017 the UK Government introduced a welcome 5-year holiday on business rates for new fibre optic (FTTP) broadband infrastructure, which is due to expire next year. But now concerns have been raised that some alternative network (AltNet) ISPs may not yet have the necessary certificates to benefit.

The rates relief from the so-called “Fibre Tax“, which came alongside various voucher schemes, regulatory changes and other investment vehicles, formed a key part of what has since helped to drive more competition into the UK market. A mass of alternative networks are now investing to help deploy gigabit-capable broadband networks alongside the big boys (Summary of UK Full Fibre Progress), which is boosting coverage.

According to INCA’s latest study (here), alternative full fibre networks grew their UK coverage by 110% in 2020 (up from 52% last year) and now cover 2.59 million premises, which is tentatively forecast to reach 29.9 million by the end of 2025 (overbuild between rivals will of course reduce the overall coverage impact of this). But achieving even less than half that number would still reflect a major impact.

Admittedly, the rates relief was somewhat of a double-edged sword for some existing operators like Openreach (BT), Virgin Media and CityFibre, not least because it was introduced alongside a “revaluation” of business rates for existing infrastructure – this effectively hit BT and Virgin with a huge tax hike on their existing networks (here). But that’s another story, as too is the historically uneven nature of how such rates have often been applied across the industry.

The Next Problem

In theory, most of those providers building new fibre optic lines since April 2017 should be able to benefit from this tax holiday (i.e. “‘new fibre’ means fibre that was not laid, flown, blown, affixed or attached before 1st April 2017“), at least until the start of spring 2022. But there’s a bit of a catch here, and evidence suggests that some altnets might not all be aware or fully prepared to benefit from the relief.

The Regulations go on to define that the network must be valued at the full rate, including the “new fibre” and the valuation officer must then certify what proportion of the total value is represented by the “new fibre” (and associated plant and machinery) compared to the whole. A certificate is then issued stating that proportion.

The MD of Dolomite Solutions, Aidan Paul, who has long campaigned for improvements to the way that business rates are applied to broadband infrastructure, recently spotted that a total of 71 such certificates had actually been issued (LinkedIn). But there’s a twist to this.

Aidan Paul said:

“That certificate is presented to the relevant Billing Authority, and that proportion is then taken off the bill. Of course, if the network was only built after 1st April 2017, the proportion is 100% and there is no residual amount on the bill.

Following a tabling of various Parliamentary Questions by Stephen Timms MP, a former DTI Minister, the Treasury spokesperson confirmed that 71 certificates had been issues but refused to say what the total value was “since only a small number of companies are included“. Ofcom has confirmed that one of those was BT.

So, based on a current number of some 200 UK operators holding Code Powers and who have in the main built new fibre since 2017, there are a lot of operators out there who do not hold certificates entitling them to the fibre tax relief.”

Just to clarify this a bit, Aidan told ISPreview.co.uk this is not one certificate per operator: “It’s not 71 operators, it is 71 certificates. One certificate for at least each of 4 years, and in the case of Virgin Media, there are some 40 different networks. So, it is probably only a handful of operators” (i.e. BT and Virgin Media alone may well account for the majority of those certificates).

Given that there are a little under 100 different altnets currently building or planning to build FTTP, that’s a heck of a gap left to fill for networks with no certificate for rates relief. Some may simply not be at the stage of needing to get such a certificate, but Aidan suggests there is a “general assumption” amongst some altnets that the “relief is automatic,” when in fact it is not. Some operators could thus be at risk of a nasty bill shock.

All of this is before we get to the ever-thorny topic of an extension to the fibre tax relief. Back in 2019 the Scottish Government set down the marker by introducing a similar 10-year relief on new fibre, yet meanwhile the relief in England is still set to expire next spring and a failure to extend it could hurt efforts to support the UK Government’s new £5bn Project Gigabit programme. Giveth with one hand, but take away with the other.

UPDATE 2:50pm

For those asking, there’s a bit more detail on getting the certificates here.