It seems the Queen’s Speech ushered in the build-up to the general election, so its open season for manifestos. I blogged previously on the two main parties very different approaches to the UK’s broadband woes, and plan to leave it here for now at least. But one area which wasn’t covered by either speech at the NextGen09 conference was any detailed proposals surrounding business rates on telecoms ducts – so I’m offering all parties my suggestion of what they could have said.
Today all telecoms ducts are rated as if they were offices by the Valuations Office Agency (VOA), essentially levying a per metre tax on network operators which will eventually be passed on to customers in the form of higher costs. BT is alone in that it is sufficiently large to be able to negotiate a discount on its rates – a discount which many other operators feel is at the very least unfair and possibly constitutes an illegal state aid (court ruling pending). Aiden Paul, CEO of Vtesse, told the BIS Select Committee hearing on Digital Britain that the discount amounted to around £190m annually. So any proposal for rates reform needs to lay this issue to bed.
Secondly, the tax means that rural areas pay more per customer than their urban counter parts – homes and businesses are farther apart so a per metre tax will generate more income for the Government. Since the focus of any broadband policy will need to consider the “final third” – the mostly rural homes and businesses that are deemed uneconomic by traditional network operators – any reform will need to consider if the rates rules are contributing to the digital divide between urban and rural areas.
In the work CBN carried out with Samknows for Commission for Rural Communities (CRC) report “Mind the Gap”, I produced a map of the Ofcom Market classifications – the model Ofcom uses to measure infrastructure competition. The map clearly demonstrated the industry has no appetite for England’s leafy lanes, preferring to focus on urban areas. So the reform needs to at least understand this division.
Ofcom Market Classifications
The easy answer is to simply scrap the rates rules on telecoms ducts but in this economic climate that is unlikely to be smiled upon by a Chancellor of any political persuasion in the coming years.So the final constraint is that the reform should cost nothing or very close to it.
So my suggestion:
- Offer 100% rates discount to any network operator that invests in Ofcom Market 1 areas – those areas where deregulation of broadband is yet to arrive.
- Since this may be considered a form of state aid, the discount should only apply to open wholesale networks in accordance with European rulings, which means duct and dark fibre should be made easily available.
- Where a network is mutually owned by a community as a social enterprise, and they have demonstrated reasonable attempts to offer open wholesale services but the market failed to respond, they should also be afforded the same discount as recognition of market failure, even if that means they are essentially a localised vertically integrated operator. This could be based on the existing charity and social enterprise rules.
Since no-one is investing in rural areas, this reform will not cost anything but it will remove a barrier to investment. While there is no suggestion that the floodgates will open and every farmhouse will have a Gigabit connection by next Christmas, it is, I hope, a reasonable measure that attempts to rebalance a broken marketplace.