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2009 Budget Fails to Offer Tax Holiday for Fibre Optic Broadband

Posted: 24th Apr, 2009 By: MarkJ
Last March i3 Group (H2O Networks) warned that the government was in danger of creating a digital divide by dis-incentivising investment in superfast connectivity unless it cut fibre taxation (tax on the rateable value of the basic infrastructure). Jeff McKeown, Sales director for Fibre Technologies, has today supported this call after yesterday’s budget failed to address the issue.

Letter to the ISPreview editor – Did the Chancellor forget to mention a fibre tax holiday?

Dear editor,

Alistair Darling certainly seems quite proud of his allocation of extra funding to digital investment in order to extend the broadband network and ‘deliver the vision’ of the Digital Britain report. However, regardless of the fact that the 2MB proposition is hugely underwhelming, he has clearly put very little thought into the ground level reality experienced by businesses trying to compete effectively in the communications marketplace.

By charging a business rate tax on any company trying to light up dark fibre networks and boost the digital economy, the government creates a significant barrier to smaller scale service providers wanting to enter the market. The Chancellor has quite readily lifted the stamp duty threshold on homes to £175k and arranged a payment ‘holiday’ to help new starters get on the property ladder; how about an equally bold measure to help the networking world?

I would suggest a minimum threshold before tax is due – perhaps 175km of fibre? One fibre pair point-to-point, or a fibre ring up to 175km with no tax; or two fibre pairs point-to-point or ring up to 87.5km with no tax; and stepped payment thresholds thereafter. An additional payment holiday of 3 years, for example, would then create the opportunity for smaller players to get started and encourage a realistic deployment of the community networks that currently feature in Lord Carter’s dreams.

Jeff McKeown
Sales director
Fibre Technologies Ltd

Elsewhere Brett Johnson, vice president of business development at AboveNet, another provider of fibre optic broadband connectivity, has backed McKeown's comments and chastised the budget for failing to address the "real issues" and "reiterating the vague plans laid out in Lord Carter’s [INTERIM DIGITAL BRITAIN] report":

Mr Johnson continued: "Firstly, the focus in high-speed internet connectivity to rural areas is important, but insignificant when compared to the fact that the majority of businesses in London are not connected to next-generation fibre optic networks.

Secondly, the high-concentration of users in urban areas demanding services and content-rich data on the move, are creating an ever-increasing bandwidth demand. With both these in mind, the UK needs world-class backhaul network solutions, which really needs to be fibre-based.

The ‘need for speed’ means that the UK is fast approaching a capacity crunch. The worst case scenario will see networks grinding to a halt, with untold affect on business productivity and competitiveness. The only answer to limitless capacity and future-proof networks, is dedicated end-to-end optical-fibre metro networks.
"

Mr Johnson added that metropolitan cities needed to lead the way but that the government could not rely on the national incumbent ( BT ) alone to deliver such services. He also criticised the chancellor for again failing to specify what the "additional funding mechanisms" for investment in this area are.
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