UK government rolls back on next-generation broadband pledge

Summary:Tax rules which tax smaller fibre companies more and the larger companies less is one of the reasons why the UK national broadband will not be completed by 2015.

The UK minister for culture, communications and creative industries for the recently installed coalition government, Ed Vaizey announced that business rates applied to fibre network providers will not be reviewed.

One of the key battlegrounds to the recent election which saw the then incumbent Labour government topple after 13 years in power, was the goal of having the fastest broadband in the European Union.

But now, in short, the new government will provide very little taxpayer's money to make this happen, if any at all. The private industry will have to build the networks themselves with consumer provided money. Though at least this is a fall-back plan and would not be as secure had it not had government backing, the review which taxes fibre network operators is making the task even more difficult.

Vaizey's stance now that he is in government has completely U-turned since last year. The business rates regime was "an active disincentive to competitive, next-generation [broadband] access roll-out" in his words last year, which also refer to tax public wireless and WiMAX network .

So instead of the government helping out the fibre broadband roll-out across the UK, they are now essentially standing in the way causing yet another obstacle for the next-generation broadband industry to jump over.

According to the Guardian:

The issue centres on the way that the Valuation Office Agency, a branch of HMRC, taxes networks. Under the current system, most operators are charged according to the length of their networks, incurring significant costs every time they "light" a stretch of fibre.

BT and Virgin Media, though, who have the largest fibre-optic networks in the UK, are taxed in a different manner, based on their revenues and expenses. Smaller rivals have long complained that this gives the biggest operators an unfair advantage, resulting in a less competitive market that harms customers.

Trefor Davis, CTO of Timico said in his blog:

"There is no change at the high end so the likes of Virgin and BT will remain unaffected. However at the smaller network end of the scale there has been a massive price hike.

In 2005 if you were running a pair of fibres over 1km you would be stung with a rateable value of £280. In 2010 this has now shot up to £2000. This will not of course affect BT because they have a negotiated total rateable value for their network."

So in short, smaller fibre companies will be needed to fill the gaps in the UK nationwide fibre broadband plan because they will have local knowledge and elements of industry specialisation. Not only this, they'll be able to add an even balance to the competition and enable fairness to the consumer.

But in reality, the larger powers of the fibre industry are maintaining the monopoly because the government is not allowing the smaller players to contribute.

Just before the UK Election in March, I asked whether an open-source government or faster national broadband speeds were more important, regardless of whether you were American or British. Two of the highest results were relating to wanting faster broadband, though the Britons who answered said "they could wait". But as the UK is considered mostly 'rural' and 'remote', one could argue that the ones who want faster broadband couldn't answer because their speeds are so slow, the page wouldn't load up.

The 50p per month tax on landline phone bills isn't looking so bad now, is it?

Topics: Telcos, Broadband, Government, Government : US, Networking

About

Zack Whittaker writes for ZDNet, CNET, and CBS News. He is based in New York City.

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