The Internet Service Providers Association (ISPA) has criticised the government’s U-turn on plans to review the way next-generation broadband networks are taxed as indicating a “complete lack of understanding” of what is needed to develop the broadband market.

Before the election, the Conservative party had promised to review the way business rates are applied to fibre-optic networks, which some have criticised as forming a major barrier to the development of next-generation networks by smaller operators. Ed Vaizey, the government’s Digital Minister, indicated last week that the government has now scrapped its plans for such a review.

“ISPA regretfully notes the complete lack of understanding required to help the development of small scale broadband networks within the UK,” ISPA said in a statement published last week, responding to the decision and to new guidance on the issue published by the Valuation Office Agency (VOA).

“Disappointment”

The organisation said it is “disappointed at the adoption of this short-term thinking, especially when businesses are looking for help from government in attracting inward investment in infrastructure projects”.

ISPA said that the new guidance reduces fibre rates for new providers of next-generation access technologies, but also “may be more expensive” for fibre-to-the-cabinet networks that have already been deployed.

“Rather than boosting small-scale projects, the changes to calculations announced increase (in some cases by a factor of 10 times) the costs for a small-scale community project, which is in contrast to government’s previous statements on this issue,” ISPA stated.

The new guidance also “does not allow for models to be developed outside of those adopted by the incumbent operator”, ISPA stated.

Urgent review

The association called for an “urgent review” of the rating system and for “realistic, lower rateable values to encourage investment in community, rural and alternative network investment”.

The rates in question refer to the application of business taxation rates to network operators’ assets. Smaller operators have long maintained that the system values their assets differently to those of large incumbents such as BT and Virgin Media, and is a major factor in upholding the dominant power of those two operators in the broadband market.

Digital Minister Ed Vaizey

In the Conservatives’ manifesto, published in February, the Tories agreed, stating that “the current system is heavily weighted in favour of the incumbent (BT) and acts as a detriment to smaller operators building fibre networks”.

System is “transparent”

The party promised to “re-examine the case for changing the rating system for fibre networks with a view to removing all current disadvantages suffered by new operators”.

Last week Vaizey said a meeting with the VOA had been “constructive”, but said a review was not needed.

“The key is that the system is transparent,” he said. “My job is to work with the VOA to bring my issues to the table. We don’t need to go through the rigmarole of a review.”