Br0kenTeleph0n3

Following the broadband money

VOA ready to bung BT billions

with 7 comments

Happines is a warm bung.

The Valuation Office Agency review of business rates on fibre-based communications networks is shaping up to be a massive bung to BT, which already enjoys a cost advantage over its competitors because of the rating regime.

In a statement to Br0kenTeleph0ne, HM Revenue & Customs said “The VOA (Valuation Office Agency, which is responsible for setting business rates) hopes to publish the results of the NGA (Next Generation Access) final third Receipts and Expenditure valuation model (for rural areas) before the New Year in 2012.”

In the HMRC statement, a VOA spokesperson said, “We are aware of concerns about business rates in the telecom sector and we wish to see greater transparency and clarity in how rateable values are set.

“The VOA is working with the Broadband Stakeholders Group (BSG) to develop a new Receipts and Expenditure-based valuation model for Next Generation Access (NGA) networks in the final third (rural areas). This is not a review of how fibre networks are taxed and no such review is being undertaken by the VOA.”

The BSG declined to comment ahead of HMRC’s publication of the review.

BT is the only telco evaluated under the Receipts and Expenditure basis (ie on profits); VM’s valuation is based on “homes passed” and the others on the length of their networks and the individual lit fibres.

The VOA says, “BT and Virgin Media are assessed on the same statutory basis of rateable value as all other rateable properties.”

It is unclear whether the VOA review will look at fixed and mobile wireless infrastructure such as base stations, masts and towers, which are currently subject to business rates. If they are not included, the cost of delivering high speed wireless broadband to rural areas, via the mobile networks, microwave or even satellite, on a per kilometre basis may be higher than need be for purely competitive or economic reasons.

This would give BT’s wires, now 40 years old in many cases, a relative advantage, even though BT has said some areas will not get high speed broadband, and that “a mix of technologies” is needed.

It is also unclear what areas are considered “final third”. If it is Ofcom’s Market 1 regions, BT already enjoys either a monopoly or “significant market power” in these areas.

In 2006 an independent report commissioned by the government recommended that fibre be zero-rated to persuade network operators to invest in it. The then minister Stephen Timms ignored the report.

Subsequent reports showed that large network operators such BT and Virgin Media enjoy a consistent price advantage over smaller network operators as a result of the VOA’s different pricing formulas.

The formula for smaller operators uses distance, making it prohibitively expensive to install and light fibre in rural areas. For a grpahic view of the effect see the bottom of this page.

While in opposition, the Conservative Party vowed to review the so-called fibre tax, but soon forgot its promise.

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Written by Br0kenTeleph0n3

2011/12/16 at 07:02

7 Responses

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  1. I believe anyone can elect to be rated on R&E basis. Can you confirm ?

    VM’s HFC network had its own basis (now used for other NGA) because it was unique – it isn’t fibre so the tones method didn’t apply.

    PhilT

    2011/12/16 at 08:31

    • Perhaps the VOA can confirm. If this proposed change means the altnets can be rated on the same basis as BT, then that’s good. But I an given to understand it actually means altents will pay a tax of £20 for each house supplied with “high speed” broadband, except for those connected by BT.
      It would be helpful for all if VOA, HMRC and BSG actually told us what they propose.

      Ian Grant

      2011/12/16 at 09:31

      • I believe the VOA made it clear that the £20 per home connected was a figure concocted in the absence of better information and derived from the per home passed number used for HFC. http://www.voa.gov.uk/corporate/Publications/Manuals/RatingManual/RatingManualVolume5/sect873/rat-man-vol5-sec873-app1.shtml.html

        They also said ” However, if new evidence of rent or cost comes to light that indicated that £20RV/HC is incorrect or unreasonable, it can be taken into account. Similarly, once established a full receipts and expenditure method of valuation could be applied to next generation access networks, if no rental evidence is available. ”

        VOA also said the revised value would be applied to them ” the altnet would be liable for £20 RV (or whatever is suggested by R&E analysis of BT’s roll-out of NGA) ”

        When all’s said and done it’s a totem pole to dance around and campaign about – is less than a tenner a year actually going to make or break any business case ?

        PhilT

        2011/12/17 at 15:35

      • Why tax infrastructure at all? Doesn’t the government already get enough from from companies via VAT, income tax, national insurance, and corporation tax?
        We’ve just seen that less than one-third of road and transportation taxes are used to benefit the road system and those who use it. So too with taxes on communications infrastructure. Few would object if the money was spent on providing better ones, preferably by those with a profit incentive to do so. Besides, shouldn’t governments live within their citizens’ means?

        Ian Grant

        2011/12/17 at 16:32

  2. When is ‘before the New Year in 2012’?

    And where is the final third…

    Somerset

    2011/12/16 at 09:55


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