ISP Vtesse Networks has lost its case at the Court of Appeal over unfair fibre taxes issued by the Valuation Office Agency (VOA) when compared with taxes issued to BT. The row exists due to the way the VOA evaluates how much companies should pay in taxes for fibre optic cable that is put in the ground. The standard method used for most companies involves paying a 45.6% tax when the fibre is lit and is based on the hypothetical rent which could be achieved from renting out the fibre. The value of this uses the length of the fibre as a basis for the cost.
BT however face different rules. They are not taxed per kilometre but based on the overall rentable value that the VOA deems is available for their network, and this is averaged over 5 years. This came in at £533m in 2006, but has decreased year on year with a value this year expected to be £255m. Based on the distance rules alone which other operators face, BT would be due to pay over £1bn. (More details on how these are worked out can be found in this computerweekly article.)
Vtesse also object to an 11% premium to operators who run short networks, and higher costs that are imposed for the first fibre that is lit on a specific route. They believe that these taxes which are only charged in the UK and Ireland are putting operators off entering the market, and leaving it within the hands of BT to deploy next generation access (NGA).
"We believe it's fundamentally discriminatory for one company to be taxed at this massively higher rate. Unless a fairer means of taxing such companies emerges, there's going to be a diminution of enthusiasm among potential entrants to the market."Tony Ballard, (partner) Harbottle & Lewis, law firm representing Vtesse
Vtesse plan to take the dispute to the Supreme Court.