The coalition government has scrapped the promised review on the tax paid on fibre-optic connections, leaving BT and Virgin with enough tax advantages to maintain their duopoly.
Confirmation that the review is to be dropped comes from Ed Vaizey, Minister for Communication, Culture and the Creative Industries, which is where broadband provision falls these days. He was speaking at the launch of a fibre-to-cabinet installation from Vtesse Networks, as reported by Computer Weekly, where he explained that despite pre-election promises to the contrary there would be no review of the existing tax regime.
The current model requires BT to pay tax based on the rent generated by a cable, as established by the Valuation Office Agency. Everyone else pays in advance for each cable used (between £2,000 and £3,000 for the first km of cable).
Not only does that help BT considerably, but it also makes things cheaper for big companies with long cables, compared to small companies with lots of short runs, which is what prompted the Conservative's stance. But now it seems that review won't take place, though the Minister did mention a forthcoming statement on the matter.
We've asked for more details about that, but haven't heard back as yet.
Fibre isn't just used to provide stupidly-fast broadband to consumers - it also provides an increasing proportion of cellular back haul. That's almost entirely leased from BT, and used to connect base stations to the operator's infrastructure with a lot more capacity than microwave can supply.
The problem is that BT and Virgin own just about all the fibre-optic cabling, and the tax advantages make it very expensive to compete with that duopoly. The Conservatives said they would address that problem, but it seems the income generated by the status quo was too much to forgo. ®