Sunday, February 13, 2011

ECJ - An ISP lost its challenge against UK Govt on the valuation for the "Fibre Tax"

[isp review] UK ISP Vtesse Networks (Vtesse Broadband) has lost its European Court challenge to the UK government, European Commission (EC) and Valuation Office Agency's (VOA) controversial Fibre Tax, which taxes their smaller fibre optic cable network in a different way from BT Group. This, they claim, can result in higher and thus unfair costs.

European Commission Statement:

"Business rates are a tax on the value of the property concerned. They are not a tax on profits or revenues. They are normally applied on all non-domestic properties, and consequently are applied to all telecommunications networks. According to British case-law, all telecommunications networks are valued as a whole. There are several methods for valuing such property. When all methods can be applied, they should result in the same valuation.

The Commission can conclude that there is no evidence that the use of this different method is not justified by the objective differences between those firms and their competitors. There is no evidence that the application of a different valuation method to BT has resulted in an advantage to (it) in comparison with (its) competitors."

Vtesse took the action after losing a similar case in the UK Court of Appeal last February 2010. The ISP later revealed in December 2010 that it had decided to stall further UK rural broadband deployment projects until the wider regulatory and tax issues could be fully resolved.

Vtesse's December 2010 Statement to

"Vtesse has demonstrated through operational evidence from its recent pilot projects in Final Third communities in Cornwall, Wiltshire, Hertfordshire and Warwickshire that there are no real technical obstacles to deploying superfast broadband services.

There are, however, some very real regulatory and economic issues to be overcome. Vtesse looks forward to rapid progress on all fronts to remove the unnecessary regulatory barriers outlined in Chapter 5 of the Report, supported by Government.

As a result of these barriers, Vtesse Networks has suspended deployment of its own residential superfast broadband services to any more Final Third communities, pending material progress on all these issues in the New Year."

According to Computer Weekly, Vtesse has described the outcome as a procedural rejection because the court allegedly never engaged with the substance of the case itself. However, irrespective of that, it has now exhausted all of its options and will no longer install any new fibre. Broughton in rural Cambridgeshire was the last one (here).

The news will no doubt be very disappointing to all those smaller operators whom had claimed that the application of a different valuation method to BT was placing them at an unfair disadvantage. In the meantime the UK government did finally manage to meet with some of the affected operators last month and proposed an £8 per year levy on residential FTTH (home fibre optic) connections. This isn't much of a change over the current system, although the VOA is now highly unlikely to give any further ground.

Vtesse Networks UK Loses Broadband Fibre Optic Tax Appeal in European Court

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