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Tax cuts and incentives to get people off satellite broadband
Monday 15 June 2009 09:43:37 by Andrew Ferguson

One of the major problems that has held back UK broadband has been the short pay back periods that projects are normally tied to, often as short as three years before a return on investment has to be shown. This means that often lower cost less technically excellent options are chosen, combine this with the business rate tax on lit fibre in the UK and one can see part of the reason for the reluctance to both light up more fibre to reduce backhaul costs and roll-out fibre to millions of homes or tens of thousands of cabinets.

Kenya is perhaps showing us a way in which we could go, the Government in Kenya has cut the 16% VAT on mobile handsets and is allowing firms to offset the cost of new fibre links into the country over a 20 year period. The aim of all this is to reduce the cost of bandwidth which is currently dictated by the costs of using satellite broadband connections.

The UK is awash with fibre optic cable, much of it though is fibre that is in the ground but not carrying any signal, referred to as dark fibre. The problem is that as soon as you light a fibre you are required to pay business rates on it. When fibre is laid it is usually not a single strand, but multiple strands for future expansion and redundancy in the case of a broken fibre, the tax system means that lighting the extra fibres on a cable that is already in the ground costs more. This has knock effects in many areas, community solutions may be perfectly able to build the infrastructure but are unable to afford the taxes, or commercial operators keep prices per Mbps high so that things like peak time congestion will only get worse.

Reducing this tax, or creating a holiday period would go a long way to helping the broadband infrastructure, there have been no signs that the Digital Britain report will address this area. One would have expected it to have been covered in the 2009 Budget if it were. Who knows we may get a pleasant surprise when the Digital Report is published, but past experience suggests the surprises will be unpleasant rather than exciting.

Comments

Posted by Dixinormous over 7 years ago
A business rates tax break or elimination would be ideal however this might be too much like forward thinking with a touch of potential for innovation.
Posted by Dawn_Falcon over 7 years ago
Why should the government bail out companies which laid massive fibre bundles, which were never going to be economic to light?

If they, say, gave tax breaks on selling them so they could be bought up the major operators and actually used for core bandwidth, it'd be one thing, but a simple tax break would be rewarding bad financial planning.
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