MPs call for end to BT's tax privileges

BT should pay the same business rates as its competitors, MPs said this week.

BT should pay the same business rates as its competitors, MPs said this week.

In a report on broadband networking in the UK, the Business, Innovation & Skills select committee said: "BT does not merit a method of taxation which differs from other providers, and one which appears to deliver to that company more favourable terms than its competitors."

MPs said that the current arrangements to levy taxes on optical fibre networks "hindered" the delivery of investment in next-generation access networks (NGA).

They recommended that the government review the application of business rates to fibre optic networks as a matter of urgency, and develop a uniform system for all providers.

The report vindicates a long-running Computer Weekly investigation into the effect of business rates on fibre network roll-out plans in the UK. Computer Weekly found that the present regime allowed BT to undercut its competitors or force them to use its networks, thus denying customers full access to new technologies and lower prices.

As a result, the UK has languished in the development of modern high-speed networks, and the ability of mobile phone network operators to introduce faster networks has also begun to be affected.

MPs acknowledged that the government had offered "a measure of support" to the industry through the increase of capital allowances, but said: "We believe that using business rates is a better way of using the tax system to encourage investment in the NGA infrastructure."

They also recommended that the government scrap the 50p per month tax on fixed phones, earmarked for extending high-speed networks into uneconomic areas in favour of direct subvention through normal taxation.

They said NGA was so important to the economic health of the nation that the government should cut or even temporarily suspend business rates on fibre optic cable to encourage NGA roll-out. "This would be a more effective use of limited public sector funds than either the recent changes to capital allowances or direct intervention," they said.

The committee also called for different tax treatments of commercial and private optical networks. They referred to Sohonet, a London company working in the film industry, which has its own internal network that it uses to communicate between the UK, Australia and the US.

"Sohonet's fibres are exclusively for this and consequently spend large portions of time inactive, unlike telecommunication companies, whose networks are always busy. Therefore, the network, while essential, is not as profitable as the same cable owned by a telecommunications company, but nevertheless is rated the same," they said.

Applying business rates to these networks on the same basis as commercial networks risked having a "significant detrimental effect" on companies that owned their own networks. "We recommend that the government instruct the Valuation Office Agency to review this area of business rates," they said.

The committee welcomed the many local and regional fibre networks springing up. They had the potential to deliver NGA to areas that internet service providers considered uneconomic. But they needed to conform to standards that would let them connect to the country's core or trunk networks, they said.

They welcomed the work of the Commercial, Operations and Technical Standards Project to promote standardisation between large service providers and local networks. "Any government subsidy should be made conditional on meeting those technical standards," they said.

The committee said the 2Mbps universal service commitment by government should mean a minimum 2Mbps service under normal circumstances to all users. The committee had evidence that the average speed enjoyed by broadband users was already 4.1Mbps. "This achievable objective would provide a greater range of services to all areas of the UK," they said.

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