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Taxation trouble

A digital economy is essential to Britain’s future, claims the government. Why, then, is it taxing small fibre-optic network operators out of the market?

That’s the question posed by an article in guardian.co.uk today about the plight of Sohonet, a niche fibre network provider that specializes in transfer of the huge video files between London film organizations and TV studios like Pinewood.

The article reveals something I hadn’t really thought about before… that the UK government currently views fibre-optic cable as a “rateable asset”, lumping it in with other commercial property as something with value that businesses should pay tax on.

And it’s not cheap either: starting at £330 for a single fibre per kilometre on a long-distance network up to 3000 km long — the price that Sohonet would have to consider if it wanted to extend its network from London out to Bristol. (For spreadsheet lovers, the UK Valuation Office Agency (VOA) lists the rates here.)

For Sohonet, which is already paying more in taxes for its fibre-optic cables than it makes in profits each year, that makes the network extension prohibitively expensive. I don’t want to steal the journalist’s thunder, so read the article for yourself to find out why this issue runs deeper.

Posted by Pauline Rigby on February 26, 2009 4:38 PM |

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Comments (2)

  • 1 Pauline Rigby February 27, 2009 3:53 PM

    Here's another impact of the high taxes on fibre: where cellular operators have a technical choice between radio links or fibre interconnects to their base stations, the extra tax rules out fibre in almost every case.

  • 2 Lindsey Annison March 19, 2009 3:01 AM

    This has been a problem for years. The Broadband Stakeholder Group started discussing it seriously almost a decade ago, when Korea were scrapping their fibre property rates to ensure that there were as few barriers to entry for ubiquitous fibre as possible.

    The property rating situation has not improved with VOA's latest announcement of rates, as has been highlighted in the Guardian article and other places. This issue is of such major import to ensuring that the UK gets a decent fibre network that it should be given far more column inches.

    Whilst the Treasury endeavours to raise taxes through property rates, it is failing to identify and realise the difference in importance to the economy of UK plc between business premises and a fit for purpose next gen network NOW with multiple players.

    There should be a moratorium on fibre property rates until 100% of this country has FTTH (not FTTC). The money known to be generated through FTTH will undoubtedly find its way to the Treasury coffers from that, and will more than make up for a few lost years of property rate revenue.

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