Q&A: Why fibre broadband taxes favour big ISPs

 

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By Nicole Kobie

Posted on 16 Aug 2010 at 16:51

The Government has unveiled the new rates for its so-called "fibre tax" - what it charges ISPs for rolling out new networks.

Minister for Communications Ed Vaizey announced the new rates last week, sparking criticism from smaller ISPs that argue BT gets an easier ride on fibre taxes.

The Valuation Office Agency rating system charges a tax for each premises as well as by the kilometre. Critics say BT pays less because it gets a specially arranged bulk rate rather than paying for each piece and already has an existing network that it no longer needs to pay to use.

We spoke to Trefor Davies, chief technology officer for ISP Timico, to find out how the rating system works and whether it will affect fibre rollouts.

Q. What taxes are at issue here?

A. First, there’s the rateable value per premises. For example, look at the fibre network that’s just been rolled out in Lincolnshire.

The ISP there has to pay about £1 per month per premises in rates to connect fibre to those premises. But BT's rates are worked out as an overall, general amount. So it doesn't really cost BT any more to put connectivity into such a place. They don’t have to pay any extra rates.

The company that’s rolling out the fibre there is paying this extra pound a month that BT wouldn’t have to pay.

Q. Is that extra pound a big deal?

A. It becomes a big deal in a competitive situation. In places like Cornwall, everybody else has pulled out because they didn’t think they’d be able to compete against BT, because BT has this overall deal on the rates.

Q. Is that the only tax?

A. There’s also the per-kilometre rates for trunking and backhaul. The same bulk rule applies for BT. They've got this negotiated, overall deal with the rating agency.

The way the rating system is set up at the moment, it favours the big guys

For a small company wanting to put fibre into a rural area, or anywhere really, the valuation office just upped the rates from the 2005 level for a kilometre of £280 to £2,000. For the most part, BT doesn't have to pay that.

Even if [the rating system was] level, the amount of rates you pay goes down for every fibre that’s lit up on a specific route. So if you’ve lit up 40 fibres, you pay a lot less per kilometre than if you’ve only lit up one.