Increase in fibre tax casts dark cloud over small ISPs

The government appears to have undermined its own promise to make the UK a leading broadband nation by 2015. The Revised Valuation Guidance for Telecommunications Networks actually makes it more expensive to deploy fibre – instead of scraping it altogether as most small Internet service providers (ISPs) hoped for.

The charge of £200 a fibre connection deployed up to 2km has increased to £850 for 1km. 10 fibre connections over 1km are now £4,400 – up from £529.

Matthew Hare, a member of the Internet Service Providers’ Association, points out that the Valuation Office Agency (VOA) who issued the new rateable values, appear to have forgotten that small businesses are planning on joining the cloud too - this massive increase in the fibre connection charge will hit them hard.

Vtesse would not invest due to these changes, which in turn would stop third rollouts as other companies like them would do the same. In contrast BT’s costs would remain the same as it pays a flat fee on incomes and revenues. ISPs, understandably, feel this to be unfair as they are left to struggle. BT points out that arguments suggesting they get preferential treatment have always been disproved.

Ed Vaizey MP, defended the changes as being of benefit to networking firms, and added that the VOA, ‘welcomes evidence to maintain a fair and accurate rating for this important market.’ However, Vtesse apparently spoke to the VAO, ‘until it was blue in the face,’ with no joy.

The long-term effects of this fibre tax could be telling in the future success of UK broadband. The coalition government are cutting spending and increasing taxes – but is this an increase that will weaken business rather than strengthen?