Business Rates on Fibre-Optic Networks

Fibre-optical cables are a business asset and as such will attract non-domestic property rates.  In August 2010, the Valuations Office Agency (VOA) published the current list of rateable values for fibre-optic telecommunications networks.  For the first time it also published guidelines for assessing NGA networks, which include FTTC and FTTP connections.

Fibre-optic cables are assessed according to values laid out in a table called the “tone of lists”, which relates to the distance, amount of fibre in the scheme and the number of fibres lit.  The rateable values start at £1,500 for a single lit fibre of 1 km length outside London and go up from there.  The bill must be paid by the company that lights the fibre.

At the opposite end of the scale, BT’s extensive fibre network is deemed too complicated to assess on this basis, so the rates liability is calculated according to the Receipts and Expenditures method.   The overall assessment is adjusted by an unpublicised formula relating to BT’s market share.  As a result, BT’s rates bill has fallen in recent years even though its fibre network has grown substantially.

Alternative operators, who do not have the scale of BT, must pay rates according to the “tone of lists” and the rates bill can quickly add up to a hefty sum, particularly in rural areas where longer runs of fibre will be needed to reach the population centres.  This creates a disincentive for alternative operators to invest in fibre; the smaller the network, the larger the rates bill will be relative to the operator’s budget.

For the NGA piece the VOA has two means of calculating rateable values:

  • For domestic users there is flat rate of £20 per home connected.
  • For businesses, the fibre is valued according to the “tone of lists”.

This raises potential anomalies, which the Broadband Stakeholder Group has been working to clarify.  The decision to rate networks according to subscribers connected rather than homes passed (at a lower rate) penalizes Greenfield operators, who would expect a high take-up of services where fibre is the only infrastructure.  Clarity is also needed on how to assess connections to small business customers; how are they  to be rated when shared fibre is employed?

The Government understands that the business rates charged on fibre represent a disincentive for small operators to invest in fibre networks.  In November 2009, a Commons Select Committee report on broadband concluded that:

The current arrangements hinder the delivery of investment in NGA, which is being championed by Government. We recommend 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.

Nevertheless, there are no plans to change the ratings regime. 

There is a glimmer of hope for communities: create social enterprises in the form of cooperatives or community interest companies to invest in local fibre projects and seek partial or full exemption from business rates.  Whether local authorities have the resources to grant exemptions in the current financial climate is another matter.

Useful links

VOA Rating Manual: Section 871: Telecommunications Fibre Optic Networks

VOA Rating Manual: Section 873 : Next Generation Access Telecommunications Network (NGA)

VOA: Agenda and speaking notes for Roundtable 11 January 2011

Vtesse Networks: Briefing paper on Business Rates on optical fibre for Francesco Caio