Opinion

Tax regime blocks progress in broadband Britain

Tony_Ballard.jpgHere's Tony Ballard, the digital law specialist at Harbottle & Lewis, tellig it like it is

A distorting tax regime will block competing operators and hand BT a monopoly on optical fibre, Tony Ballard, a digital media specialist at law firm Harbottle & Lewis, has warned.

Ballard fears the damage that a single monopolist could wreak on the fledgling broadband market in the UK.

The strategy document, Britain's Superfast Broadband Future, neutralises any good work - such as creating a regulatory and policy environment for the delivery of superfast broadband - by failing to deal with the tax distortion.

BT's business rates for optical fibre are calculated on the basis of its receipts and expenditure, while competitors are charged by the length of their fibres. This means BT pays so much less for new fibre that operators pay £750/km, while BT pays £19 per km.

"Smaller companies competing with BT carry an enormous handicap," says Ballard. With competitors priced out of providing, BT becomes the preferred bidder in a monopoly position. This cannot be healthy for a developing market.

The government's announcement seems to dismiss such concerns out of hand. It says that business rating of telecoms networks is a complex issue and often misunderstood by the industry and commentators.

"Actually, it is the government that has failed to understand that investment is unattractive if the playing field is tilted against you," argues Ballard. Funds will be invested elsewhere if the rules of the game are not even-handed.

 "The UK is the only country in the EU to tax optical fibre infrastructure," he says. 

This was first published in December 2010

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