The UK’s coalition government is facing a backlash from telecommunications network opertors after scrapping a promised review of how fibre optic networks are taxed.
Under the current tax scheme, most network operators are taxed according to the length of their network infrastructure. However, this does not apply to BT and Virgin Media, the two largest players in this segment, which smaller operators believe to be unfair.
The Conservative party has criticised the scheme in the past. In fact culture minister Ed Vaizey, who revealed last week that the review would not go ahead, said last year the it was causing “huge damage to telecoms in the UK".
Before the election, the Conservatives said that investment in broadband Internet infrastructure should come from the private sector, not the public purse. Network operators therefore see last week’s announcement as hypocritical.
"If the government cannot provide funds to help roll out networks because they expect the market to do it, the least they could do is not put direct disincentives in our way," Chris Smedley, CEO of UK fibre network provider Geo, told the Guardian.
"They simply cannot expect us to invest in an area, and then tax it so that it is not economically viable,” said Aidan Paul, CEO of network operator Vtesse Networks, which unsuccessfully brought legal action against the government over the matter.
Last month, the government pushed back its target for making broadband Internet connection available to all UK citizens by three years to 2015. "I have looked at the provision the government had made to achieve this by 2012 and I’m afraid that I am not convinced that there is sufficient funding in place," culture secretary Jeremy Hunt told a telecommunications industry conference.
A study published by the Fibre To The Home Council Europe and telecoms analyst Heavy Reading in June predicted that it would take until 2020 for deployments of fibre broadband to reach 20% of the UK population. This would represent the slowest level of take-up in the entire continent.
The research also estimated that at present there are only about 5,000 fibre broadband subscribers in the UK, based primarily in London, Liverpool and Kent.
