Changes to the fibre tax have been proposed by the Valuation Office Agency (VOA), the department of the UK's tax agency which defines how specific things should be valued. After consultation with industry, including the Broadband Stakeholder Group, new proposals have been put forward that should make it more affordable to deploy next-generation access (NGA) networks which use fibre to deliver the service.
Vtesse Networks raised the issue of high taxes, particularly when compared with how the VOA treats the same taxes for BT. Other providers are taxed per kilometre of fibre and the number of fibre lit whilst BT had their network examined as a whole which meant that taxes were significantly lower, representing an unfair advantage. Vtesse took their case to the courts, but lost at every stage, including at the European Court of Justice. Virgin Media are also treated differently and have their taxes calculated based on the number of homes passed.
In the changes proposed the VOA state that there are different types of networks and locations which will warrant a different approach to how NGA networks are rated. In the two-thirds of the country reached through traditional private roll outs (i.e. not the 'final-third'), rating should be based on a similar basis to Virgin's cable TV network but on a "per end user" basis rather than "per home passed". This will offer some advantages as there is likely to be low take up at the start, and providers would only have to pay for what they use. There may be some exceptions for large business customers or high bandwidth customers which may see the traditional style of fibre rating still apply.
In these urban and sub-urban areas, the VOA propose that NGA connections will be rated at £20 per home or SME connected, or £18 pounds if utilising sub-loop unbundling (as BT would still retain rating liability on the final drop from the cabinet).
In the final third, where public subsidies are required for capital expenditure, a 'receipts and expenditure' model will be used which would be equivalent to how BT's network is taxed. This should give a variable scale of rating of £2, £6.50, £10 or £13 per end user depending on the factual data of the network. This would largely see the scale split by areas, with these defined in the ratings manual.
This looks to decrease costs that providers will likely have to pay as networks will no longer be charged based on the number of fibres used or the length of these fibres, but at a fixed cost depending on how the region and network is defined and the number of homes that are using the network. One question does remain and that is how projects will be taxed that are deployed in regions that are considered to be the final-third but are not using public subsidies. Some councils have already denounced the BDUK scheme and networks deployed in these regions could face fibre tax rates at the higher £18/20 per home connected.