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Business rate increases will hurt UK broadband sector, says industry

Stakeholders have criticised the Valuation Office Agency for huge rises in business rates on fibre cables that may affect the cost of broadband services

The Valuation Office Agency (VOA) has been criticised by broadband interest groups, including the Broadband Stakeholder Group (BSG) and TechUK, after imposing major increases in business rates charged on fibre-optic cables for a number of the UK’s biggest network owners and internet service providers (ISPs)

The VOA published the proposed new rates on 30 September. They will come into force in April 2017, and some of the biggest increases in rateable values will affect the likes of BT, which faces a rise of more than £550m in England and Wales to £714m next year.

The rate rises also hit a number of other telecoms businesses, including Colt, Sky and Virgin Media, which will see its rates go up fourfold. The VOA effectively treats fibre as part of a business premise, and as such, cables carry a rateable value.

Virgin Media chief executive Tom Mockridge accused the government of ducking responsibility for an increase in tax on digital infrastructure just when the UK needed investment in digital infrastructure.

A BT spokesperson said it was “highly likely” that such a substantial increase would result in price rises for both consumer and business customers.

“We are extremely disappointed by the new rateable values that have been published today and which are clearly excessive,” said the spokesperson.

TechUK CEO Julian David said the proposals were puzzling given that the government had recognised broadband was a vital service to both consumers and businesses, and had invested in it over the years.

“Yet with these proposals, the VOA aims to increase the cost of better broadband right across the board – all providers, all technologies,” he said. “Whichever superfast broadband delivery technology businesses and consumers choose to connect with, these huge business rate rises will be passed on to them.

“This not only undermines the government’s digital strategy so far, but will also discourage investment. Also, it calls into question the potential for the UK to be a leader in 5G. This is little short of a connectivity tax. It will hit everyone hard – businesses large and small and, significantly, it will significantly impact price-sensitive consumers.”

Introduces instability

BSG chair Richard Hooper said the rises went against the objective of investing in digital infrastructure to support the current and future needs of the UK economy.

“It introduces instability and risk at a time when we need it least,” he said. “The government needs to consider how to mitigate this impact and work to ensure that the whole of the public sector is working to encourage rather than deter investment.”

James Blessing, chair of the Internet Service Providers Association (ISPA) said the challenges the country now faced following the vote to leave the EU meant the government was obliged to create a better environment for investment based on “certainty and stability”.

“The government rightly wants the UK to continually improve its digital infrastructure and our members are investing heavily in their networks,” he said. “Significantly raising rates in this way is only going to put up barriers to investment and make bills more expensive for consumers and businesses.”

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