back to article Telcos hit out against plans to hike their broadband rates

Broadband providers have rallied against draft plans to hike up the cost of business rates, which will result in a "steep" increase for broadband providers laying infrastructure. The Valuation Office Agency has today published its plans for proposed non-domestic business rates next year. Virgin Media CEO Tom Mockridge …

  1. Steve Davies 3 Silver badge

    BT (and the rest) will just pass it on

    to us, the end users. For them it will end up being cost neutral.

    My guess that we will all pay at least £1.00/month more.

    My gripe is that these cost differences (fibre vs non fibre) will further push back the day when we might (yes I'm dreaming) get FTTH instead of FTTC.

    There is just no incentive, actually a disincentive to put Fibre in now.

    If you ain't got it now then my guess is that you ain't gonna get it.

    1. Grease Monkey Silver badge

      Re: BT (and the rest) will just pass it on

      Well of course they'll pass it on. That's how business works. You pass on your expenses to your customers otherwise you wouldn't make a profit and if you don't make a profit what's the point of being in business.

  2. Charlie van Becelaere
    Facepalm

    One wonders

    "He added: 'The Treasury needs to tell the VOA think again.'”

    Why the superfluous "again" in that sentence?

  3. Anonymous Coward
    Anonymous Coward

    Could someone explain what the rateable value affects with regards to laying new infrastructure? I only know about rates with relation to commercial buildings.

    None of the reports about this seem to explain.

    1. Anonymous Coward
      Anonymous Coward

      Business Rates

      Because all Telco's in addition to paying rates on their non-specialist buildings such as offices and shops and call handlingc centres also pay rates on operational property such as telephone exchanges, radio stations, cellular base stations, data centres, and every single metre of cable, manholes, junction boxes, cable ducting, fibre, cabinet and any other street furniture you care to think of.

    2. Anonymous Coward
      Anonymous Coward

      "Could someone explain what the rateable value affects with regards to laying new infrastructure?"

      The primary problem is that the rates are payable even if the infrastructure is idle - it's not based on utilisation. If you're planning on laying some fibre better be sure that you have some customers ready else you just lose money.

      1. Anonymous Coward
        Anonymous Coward

        > The primary problem is that the rates are payable even if the infrastructure is idle

        And indeed we've had customers hit by the effects of this in the past. Last time there was a hike in the rates, we saw operators just shut-down services rather than pay for them. The end result was the ending of vital services for customers "in the middle of nowhere" as far as alternatives were concerned.

        Round Cumbria, the terrain isn't exactly conducive to cheaply provisioning internet access to quite a bit of it. In one case, we had a customer using a service that relied on (IIRC) 5 radio masts to get the service to him. Once they were told they'd pay rates on what each of those masts could theoretically do in revenue terms - regardless of the lack of potential customers - they decided that there was suddenly no commercial market for the service and announced that it was shutting down (at quite short notice).

        Right now, at work, we are under notice that our internet service will turn off next year - and apart from the issues of it being a bit of legacy network that came from several levels of acquisition, I reckon business rates will be behind it.

        This whole "BT get preferential treatment" complaint isn't news.

        And as mentioned several times - it's a huge disincentive to try and do anything other than resell BTOR circuits.

  4. Buzzword

    Back of the envelope calculation

    Rateable Value rising from £158m to £715m means a rise of £557m, multiplier is 49.7%, giving BT a bill of £276m. There are 26.7m households in Britain, so that's just over £10 a year each. Rounding up to £12/year, that's £1 per month per household.

    The direct bill to consumers will be a bit less because I haven't taken into account business telephone lines, but ultimately it's all coming out of the same pockets. This isn't a tax hike on BT; it's a tax hike on all of us.

  5. Anonymous Coward
    Anonymous Coward

    I just want cheap broadband and not expensive football with no desire to cross subside broadcast purchase rights.

    1. Anonymous Coward
      Anonymous Coward

      Football rights / broadband costs

      Disclosure: I work for BT.

      I hate football, so I totally empathise with you. However, commercial realities mean that you and I don't have a choice. Ofcom has chosen, for entirely understandable reasons, to focus on driving down the retail coat of broadband. Sky chose, again for very understandable reasons, to give away 'free broadband' with its TV channels. The public, or at least enough of them for it to matter, will pay remarkable amounts to watch football.

      BT Consumer therefore found itself haemorrhaging customers to Sky, and it had a choice:

      1. Do nothing, effectively surrender to Sky, rapidly go bankrupt, and everyone could watch as prices were then forced up by Sky, who were at that point a de facto monopolist (of TV/sports rights); or

      2. Take a huge gamble, and launch our own TV channel, and compete for sports rights. Then, by enabling competition, promote a market for both broadband and sports between BT Consumer, Sky and Virgin Media.

      There was no 'status quo' option. Ofcom & Sky's actions, whether we like it or not, and whether it's arguably in consumers' interests or not, meant that standing still, for BT Consumer, meant eventual bankruptcy. Unfortunately, broadband costs and sports rights are inextricably linked: too many people choose their broadband provider based on what sports they can get, for it to be otherwise.

      Am I missing anything?

      1. Anonymous Coward
        Anonymous Coward

        Re: Football rights / broadband costs

        Disclosure - I hate BT - for repeated billing errors and complaint department bullshit.

        I think we need a poll, I for one have no interest in buying internet access to watch football; and BTs "opt in" approach to it alienated a lot of customers.

        Having bought EE, BT as a group, are nearly as close to being a monopoly today, as they were when they were privatised.

        Why BT/EE was allowed, but the O2 merger stopped comes down to brown envelopes; I expect to see the current head of OFCOM with a cushy BT/EE retirement job in the next 24 months.

        1. leexgx

          Re: Football rights / broadband costs

          ee/BT has no effect the the mobile landscape (and EE is just a virtual provider at the moment, EE is the main

          even though i would of preferred it, the O2 and 3 merger would have reduced the 4 networks to 3 and given 3 overall coverage that can match or exceed EE (with native 3uk 2g fall back on o2)

      2. This post has been deleted by its author

    2. Steven Jones

      Then get you BB from a no-frills provider.

      Well buy your broadband from an operator that doesn't bundle sports into the broadband costs, not BT Consumer (or for that matter, Sky or VM bundled products). The wholesale costs for lines and FTTC contain precisely no element for those sports rights. Full stop. None. Not a penny. There are many other ISPs to choose from.

    3. Anonymous Coward
      Anonymous Coward

      "I just want cheap broadband.."

      Assuming you're in the UK, you already have very cheap, widely available broadband. More so than in most other places in Europe, the US, Canada and so on...

      1. Anonymous Coward
        Anonymous Coward

        @AC, have you ever considered why BB is cheap in the UK compared to the US, Canada and Australia ?

        I'll give you a clue, they are much bigger countries than the UK with a much lower population density.

        1. Anonymous Coward
          Anonymous Coward

          "@AC, have you ever considered why BB is cheap in the UK compared to the US, Canada and Australia ?

          I'll give you a clue, they are much bigger countries than the UK with a much lower population density."

          Indeed - but you're ignoring the word 'Europe'.

  6. Mage

    Madness

    See title.

  7. Dave Harvey

    Does BT still get a discount?

    When I was involved in a 3rd party FTTC programme here a few years ago, one of the (many!) complaints from small ISPs against BT (as Openreach) was that the "fibre tax" (business rates on fibre in the ground) was applied VERY differently to BT compared to other telcos, thereby giving BT a huge competitive advantage. Is that still the case, or is some of BT's beef with the current change that they're losing some of their preferential tax treatment?

    1. Steven Jones

      Re: Does BT still get a discount?

      That has been tested in court on several occasions and the challenges to the rates authorities have all failed. It's been challenged in UK courts and in an EU case on state aid grounds.

      Here's just one example.

      https://robbratby.com/2011/02/08/illegal-state-aid-challenge-to-tax-levied-on-bts-uk-fibre-network-fails-in-european-court/

  8. Grease Monkey Silver badge

    A big problem at the moment is the ISPs' priorities in what upgrades they deliver and to whom.

    Just to avoid jumping on the BT bashing bandwagon lets take a look at Virgin first. They keep on upgrading existing infrastructure while not expanding their network. A friend of mine recently received some spam from Virgin telling her the 100Mbps service on her street has now been upgraded to 200Mbps and making her a special introductory offer (something that should be banned - existing customers should not be expected to subsidise new ones). Meanwhile another friend living two streets away still does not have access to Virgin fibre.

    BT keep on upgrading infrastructure for some exchanges while not touching others. I see exchanges where customers are still on 20CN ADSL1 services, while other exchanges that were upgraded to 21CN ADSL2+ years ago and have since been upgraded to FTTC are now being upgraded to FTTP. I remember BT telling me 20CN was going EOL years ago, so why is there still so much of it out there when other customers are getting FTTP?

    Yes you can say that those exchanges are more profitable, but it is ridiculous that some people are getting their home internet access (I hate the term broadband) from 3G and 4G services because the fixed line service in their area is so poor.

    The way the market seems to work is that BT hold back from offering very high speed upgrades where there is no competition. As soon as somebody else, Virgin for example, offers or even threatens to offer fast fibre services in any given area that area suddenly jumps up BT's roll out plan. Equally Virgin are not interested in rolling out new or upgraded services even in urban areas until BT announce plans to outdo them. As such there is no incentive for BT to roll out fibre (TTC or TTP) as long as long as ADSL is the only game in town. Equally there is no incentive to Virgin to roll out fibre to areas they don't already serve.

    The best way the government could deal with this? Exclusivity. All the government needs to do is give a period of exclusivity deal (say 5 years) to whoever rolls out high speed services to an area or even a street. So if and ISP rolls out fibre to my village (unlikely) then anybody else who wants to offer fibre in that area must use that ISP's infrastructure for at least five years. This is a big incentive. It means that non only does the ISP get the revenue from any customers they sign up, but they also get wholesale revenue from other ISP's customers who want fibre. It also brings us back to the original model of the cable rollout.

    Most people probably don't even remember it, but back in the day small companies bid for cable franchises on a local basis. The likes of Jones Cable and Yorkshire Cable got the deals round here. As a model it was a good idea because smaller companies were competing with each other for new areas. The problem was that those companies all got swallowed up by Telewest and NTL and those two by Virgin. All of which gave us a second effective monopoly (if you see what I mean) rather than a competitive market. Virgin are actually in a more protected position than BT as there is no obligation for them to throw open their last mile to other ISPs.

    A model such as I'm suggesting would encourage new operators to enter the high speed infrastructure market.

    1. Anonymous Coward
      Anonymous Coward

      @Grease Monkey

      "The way the market seems to work is that BT hold back from offering very high speed upgrades where there is no competition. As soon as somebody else, Virgin for example, offers or even threatens to offer fast fibre services in any given area that area suddenly jumps up BT's roll out plan."

      It's a little more complicated than that, but I can see why it looks that way you describe it.

      The telcos use much the same rating mechanisms to determine where to roll stuff out and that work's often done by outside agencies. At its heart is some maths - density of housing multiplied by propensity of those households to spend money on broadband. If the score is high enough, the investment happens - and that's as true for Virgin and BT as it is for the smaller operators.

      They have to do this because network rollout costs about £2K per property as a national average and if the houses are too far apart or the people who live there can only afford basic broadband they lose money. Lose enough money and they go bust.

      Your 5 year exclusivity idea is interesting, but if it comes with the caveat that Joe Bloggs Telco has to let anyone else use it to offer service, Joe Bloggs loses interest. That's because he can only make a return if he sells the whole service, not just renting the last mile. Building infrastructure for competitors to use is crazy - Joe Bloggs has to beg money from investors, take all the risk, then Delboy ISP comes along, no risk, and uses the kit he's installed to make money for himself. It's better for Joe Bloggs to wait for someone else to install kit and then copy Delboy - much lower risk and much quicker returns. Building and owning network is high risk and low return - not what the banks like to see.

      1. SImon Hobson

        Re: @Grease Monkey

        > It's a little more complicated than that, but I can see why it looks that way you describe it.

        There is actually quite a bit of evidence to suggest that BT(OR)does (or at least has done in the past) engage in such aggressive anti-competition tactics. For example, round our way there's a lot of rural greenery - ie not exactly the sort of place where BT OR wants to spend a lot of (other people's - our county councils have given them a lot of dosh) money to build out FTTC etc.

        So there is a community project that's been steadily over the years been building out gigabit FTTP. On more than one occasion, their announcement along the lines of "our next expansion of the network will be into X,Y, and Z villages and area" has been quickly followed by a BT announcement that "X, Y, and Z will soon be getting fibre". Absolutely nothing whatsoever has changed in the demographics or geography - the only change is that the customers in these areas will soon have an alternative (and much better) option.

        I suppose that you could argue that if the residents in a village show that they are prepared to put the effort in (it's a community project remember) and pay for the quite reasonable connection costs, that might influence the guestimate of what the market is for FTTC. But mostly it looks very much like a spoiler operation - to try and prevent that competitor from getting a foothold by stealing their customers with a promise of FTTC at some future date that amazingly keeps slipping and slipping.

        Other examples involve villagers clubbing together and contracting with some outfit to do a microwave link to someone's house and distribute from there. Again, BT suddenly announcing that the economics have suddenly changed - and it's completely coincidental - suddenly looks very much like a spoiler to get enough of those villagers to change their mind and make the project uneconomic. For the FTTC install date to keep slipping once the threat of competition is off the table is again a complete coincidence.

        .

        So yes, there will be some element of different operators making the same economic case and coming to the same conclusion. But there really is too much of a sh*tload of coincidence for anyone to believe there's no spoiling going on on BT(OR)'s part.

  9. Squander Two

    Rateable values are not rates.

    The rates on a premises are a combination of two things: its rateable value and a multiplier. The multiplier is there simply so that authorities don't have to survey every property in the country every year: instead of surveying a property again to see how much its value has changed in the last twelve months, councils just multiply last year's valuation by 1.2 or whatever. I did a report on the system for my GCSE (many many years ago), and discovered that Southwark Council were at the time using rateable values based on thirty-year-old surveys -- with, of course, a huge bloody great multiplier.

    In other words, this kind of huge leap in rateable values is completely normal, and it doesn't usually lead to equally huge leaps in actual rates.

    I'm happy to admit I'm hardly an expert on this. Is there some reason why, on this occasion, a fourfold increase in a rateable value could lead to a fourfold increase in the rates? Or are the ratepayers taking advantage of the public's ignorance of the system to threaten them with drastic price hikes?

    1. Squander Two
      FAIL

      Re: Rateable values are not rates.

      Actually, reading the piece again, I see that it's The Register, not the telcos, who've claimed that a fourfold increase in rateable values equates to a fourfold increase in rates. [sigh] This magazine used to get stuff right.

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