Scrap the Fibre Tax

December 06, 2010 12:41 PM

Today, Culture Secretary Jeremy Hunt announced the government’s plan to roll out broadband for everyone across the UK. Mr. Hunt said that in the next seven years £830m of public money will be made available and BT said that it will match any of this funding that it receives with its own investment. All of this is well and good in achieving the Coalition’s Government goal on broadband access, but a little known tax, called the Fibre Tax, is actually hampering investment from small to medium sized ISPs in fibre and technical infrastructure.

The Fibre Tax is a tax assessed by the Valuation Office Agency (VAO) on fibre deployment and ‘lighting’ – or the turning on of fibre so that it is ready to use. Companies have to pay in advance if they are hoping to set up smaller networks – even by renting lines from larger ISPs. Prior to this summer, it cost ISPs £200 for one fibre connection deployed over 2km. Now, it costs ISPs £850 for one connection over 1km and ten connections cost £4,400 over 1km. If you do the maths, an ISP that deploys or rents fibre over 100km, say, could pay up to £440,000 for ten connections. BT is exempt from this tax, however, as they are charged a flat fee based on incomes and revenues.

The announcement today by Jeremy Hunt makes this tax an issue once again. Before the election, the Conservatives promised to review business rates and how they apply to fibre. Over the summer, however, it was announced that the Coalition Government would not review these rates. Not only were the rates not 'reviewed', but the cost of the tax went up. In this age of austerity it would make more sense to remove the tax altogether and have the government invest less – if even anything at all – rather than collect taxes and reinvest the money back into the next generation fibre network. It would seem that the government would rather pick winners than allow competition within the market.Today, Culture Secretary Jeremy Hunt announced the government’s plan to roll out broadband for everyone across the UK. Mr. Hunt said that in the next seven years £830m of public money will be made available and BT said that it will match any of this funding that it receives with its own investment. All of this is well and good in achieving the Coalition’s Government goal on broadband access, but a little known tax, called the Fibre Tax, is actually hampering investment from small to medium sized ISPs in fibre and technical infrastructure.

The Fibre Tax is a tax assessed by the Valuation Office Agency (VAO) on fibre deployment and ‘lighting’ – or the turning on of fibre so that it is ready to use. Companies have to pay in advance if they are hoping to set up smaller networks – even by renting lines from larger ISPs. Prior to this summer, it cost ISPs £200 for one fibre connection deployed over 2km. Now, it costs ISPs £850 for one connection over 1km and ten connections cost £4,400 over 1km. If you do the maths, an ISP that deploys or rents fibre over 100km, say, could pay up to £440,000 for ten connections. BT is exempt from this tax, however, as they are charged a flat fee based on incomes and revenues.

The announcement today by Jeremy Hunt makes this tax an issue once again. Before the election, the Conservatives promised to review business rates and how they apply to fibre. Over the summer, however, it was announced that the Coalition Government would not review these rates. Not only were the rates not 'reviewed', but the cost of the tax went up. In this age of austerity it would make more sense to remove the tax altogether and have the government invest less – if even anything at all – rather than collect taxes and reinvest the money back into the next generation fibre network. It would seem that the government would rather pick winners than allow competition within the market.

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