HMT second phase business rates response

UKCTA welcomes this long overdue review of the business rates system. Our members build critical national infrastructure which, as the COVID pandemic has demonstrated, is more vital than ever.

This response should be read in conjunction with our earlier response on the issue of rates relief dated 18th September 2020.
Our comments and proposals in relation to reform of the rating system are made in the context of a policy environment in which the Government has set as a priority the delivery of nationwide gigabit capable connectivity by 2025. Gigabit capable telecoms networks are now regarded as being vital for the economic future of this country. The COVID 19 pandemic has made it more obvious than ever why this needs to be a national priority.

As such policy must be designed to allow for investors in gigabit capable services to help deliver Government’s digital objectives, including amongst other things reforming the current business rate system to help further incentivise investment in gigabit capable networks.

Advances in technology have allowed the legacy copper-based networks built over the last century to be adapted for data transmission but they have been pushed to the limit and are now struggling to meet the continually developing needs of consumers in terms of both bandwidth and reliability. In addition, maintenance of copper networks is becoming increasingly difficult and expensive as spare parts become harder to source and a complete phased withdrawal (of the Openreach copper network) is planned by 2025. Furthermore, the development of the new 5G wireless technology requires fibre connectivity to each transmitter/receiver in order to function. As a result of these developments, a significant and rapid investment to deploy new state-of-the-art digital infrastructure is urgently required.

Until now, the UK has significantly lagged behind its European counterparts in this area and despite significant investment from a number of providers including UKCTA members, only 14% of the UK currently has access to a full fibre connection, while only 57% has access to an Ultrafast connection (ie download speeds of at least 300 Mbit/second). (1) To put this into context, Spain has 85.6% (2) full fibre coverage and Portugal 99.1% (3).

The massive shift to home based working which we have seen in 2020 has shown the vital role which digital connectivity has at the heart of our economy and society, generating business opportunities and enhancing welfare in all sectors – not just within telecoms markets.

As at the date of drafting the UK appears to be in the early stages of coping with the second wave of COVID 19. The large scale shift we have seen of office workers being home based it is increasingly likely that the change to the “new normal” will become a permanent feature for UK office workers with companies realising that concerns over productivity were unfounded. Significant numbers of staff are likely to want to continue to enjoy the benefits of at least some working from home and companies seem likely to embrace this shift.

Rollout of gigabit-capable broadband will also play a significant part in helping the UK reduce carbon emissions and meet the Government’s 2050 net zero target. This was pointed out in a recent report by Ofcom, in which the regulator stated that ‘annual net carbon dioxide equivalent (CO2e) savings from increased remote working (attributable to faster broadband) are estimated to be 0.24 million tonnes by 2024. Adding to that the CO2e savings from the changes in business travel and server emissions, the total net carbon savings from faster broadband could be 1.6m tonnes of CO2e per annum by 2024, which equates to a value of about £100 million.’(4)

It is therefore now more important than ever that gigabit-capable broadband rollout is accelerated. Gigabit capable networks are key to facilitating this shift and the government should seek to adapt policy to support the significant investment which will be needed. Reform in areas such as the fibre tax will help to reduce the proportion of the country which is not viable for commercial deployment and thereby reduce the amount of government subsidy which will be required. Conversely, failing to take action to remove the disincentives to invest in this critical infrastructure will increase the level of subsidy required together with the attendant bureaucracy needed to facilitate such public sector interventions.

Both the Government and Ofcom recognise that the required investment levels to meet these current and future connectivity requirements is substantial; indeed, industry estimates suggest national fibre coverage will cost around £30bn. (5) This is an unprecedented level of investment, exceeding even the very significant levels of capital expenditure in fixed telecoms following market liberalisation in the 1990s. The spike in investment which the UK saw in the early 1990s was facilitated by the policy framework set by the then government creating a strong industrial market policy which created a huge inflow of overseas investment. In the post Brexit environment there are both opportunities and threats. It is vital that the government takes steps to create materially improved investment conditions for infrastructure investment by creating a policy which ensures that incremental infrastructure tax will not continue to be levied.

Currently, the majority of broadband in the UK uses outdated copper cables which limits speed and quality of service. Gigabit capable connections replace the copper line with a new connection directly into homes and offices. This allows speeds of 1 Gigabit per second or more. These connections are more reliable, greener, and easier to maintain.

Research by Regeneris, on behalf of CityFibre, forecasts the economic benefits of full fibre will be particularly felt by SMEs, with full fibre in 100 towns and cities expected to deliver £2.2bn in productivity benefits; £2.3bn from innovation; £1.9bn from flexible working and £2.3bn from start- ups. We must, however, ensure that this rollout is truly nationwide. The danger is that some parts of the country are given access to this technological leg-up, while other areas are left behind on copper, creating a damaging digital divide.

Continued taxation of technologies which can help to boot productivity makes no sense at a time when the UK’s productivity still lags behind our leading European competitors at 102.02 GDP per hour, compared to France on 105.29, Germany on 107.42 and Spain on 107.80 (2017 OECD Figures).

To maintain its status as a leading digital nation, the UK needs to transform its connectivity and this needs to reach every home and business in the country to support our local and national economies. The current system of business rating acts as a brake on fibre investment, with every pound spent on rates diverting funds away from this vital investment in critical national infrastructure.

The current business rating regime for telecommunications infrastructure continues to damage the prospects for competition and investment in UK gigabit capable networks, both of which are essential to the future competitiveness of the UK. Until rating policy changed during the last 20-30 years, fibres and ancillary property (ducts, chambers, cabinets etc) were exempted as plant and machinery. With effect from the 2000 rating list, these were listed separately as telecommunications hereditaments. This change was introduced by The Non-Domestic Rating (Telecommunications Apparatus) (England) Regulations 2000 and equivalent in devolved nations eg The Non-Domestic Rating (Telecommunications Apparatus) (Wales) Regulations 2000. From this time, there has been a material disincentive to further infrastructure investment. UKCTA has consistently raised its concerns in this regard dating back to its evidence before the Trade and Industry Select Committee in 2003.

If HMG were minded to accept our concerns in relation to the undesirability of the ‘fibre tax’, a remedy could be readily achieved by amending the 2000 regulations in such a manner as to deliver a more efficient, more transparent system of rating gigabit capable networks.

UKCTA ‘s concerns with the current system have been broadly acknowledged. For example, the House of Commons Treasury Committee identified a number of problems in its report into the impact of business rates (6). This report was wide ranging and did not focus on the telecoms industry alone but it concluded that many of the most profound impacts were experienced by the telecoms industry as a result of the 1989 decision by the then government to extend business rates to telecommunications networks.

The Committee’s findings include for example:-
“business rates can work against government policy to improve productivity, improve digital connectivity and encourage the use of more energy efficient technology” – each of these being a characteristic of gigabit capable networks.

and

“tweaking the current system of business rates through an increasingly complex web of reliefs does little to address the negative aspects of this tax and simply illustrates how broken the system is…….the Government needs to be curious, proactive and creative in exploring alternative options”

and

“Businesses deserve a system that is reactive to changes in the modern economy and fit for purpose.”

In addition, the Competition Market Authority determined (in TalkTalk Telecom Group plc v Ofcom (7)) that the current approach to business rates on optical fibres distorts competition which conflicts with the need for Member States to ensure a level playing field in the sector. (8)

This is not a new issue, UKCTA’s Members have been arguing for change in this area for the last 18 years. The first (2002) report of the Broadband Stakeholders Group called for action on the distortive impact of the business rates system on the industry, leading to a Ministerial promise by then Minister Stephen Timms MP to the Commons that the system would be reformed. The government then established an expert group supervised by the then DTI to undertake a comprehensive review. The draft report from this group was produced in 2004 and recommended that the Government seriously consider de rating what were then known as “Next Generation” networks.

We believe that this could be remedied by following the recommendations of the expert group - in short the Government should amend the current regulations to de-rate gigabit capable networks. By shifting the rates burden from cables and ducts hidden out of sight beneath the ground (which makes them inherently difficult to assess for rating purposes), the Government could boost investment and greatly simplify the administration of the rating system.

Such a decisive move would send a strong signal to private investors and the public that the Government is serious about delivering its gigabit digital objectives.

Any reduction in the tax take from such a change could be offset by efficiency savings (which we describe below), by increased productivity and by ensuring that the tax burden borne by our members on their buildings, is applied equally to all.

The current system, as applied to telecoms networks, is burdensome for both Government and the taxpayer. Over the years, this model has been subject to numerous successful challenges which have resulted in an increasingly complex set of rules involving discounts, geographic weighting, differentiation between trunk and access fibres etc. We support the objective of reducing the overall burden on industry. This is not an issue of the sums raised, rather a matter of removing the disincentive for investment while cutting red tape, system costs to industry in terms of management time and administration time, fees for professional advisers used to negotiate settlements, time and money spent on negotiations and disputes. The burden on the VOA is doubtless also very significant which has doubtless been a critical factor in the delays incurred in resolving disputed network assessments.

It is also worth noting that the current system involves huge uncertainty for investors and operators as to what the tax bill is going to be – uncertainty in general is the enemy of business. At a time of immense economic upheaval as a result of the COVID 19 pandemic, as well as the legal uncertainty over the UK’s trading arrangements with our major trading partner. All of this takes money away from investment in infrastructure (from fibre investment), so driving uncertainty out of the tax system would be a welcome step for government to take.

Our proposal is that by removing gigabit capable networks from the defined telecoms hereditament, fibre optic cables or HFC cables, ducts and wayleaves related to gigabit capable broadband would be removed from rateable assessment sending a clear signal to investors that the UK is serious about getting gigabit capable broadband done. The cost of this measure amounts to some £290M annually which is relatively modest in comparison with some existing reliefs, and would be offset by the ensuing boost to productivity and the wider economy. Furthermore, is appears likely that the valuation of operational buildings results in inconsistency of comparable valuations and that a more fair and transparent way of assessing such buildings should be developed and applied throughout the industry.

The consultation has set out a number of ‘strengths’ of business rates with which we take issue:

“Previous reviews have reflected a consensus that business rates have distinct strengths as a tax. These include the facts that business rates provide a significant level of revenue, are highly efficient in collecting tax due, and are an important source of funding for key local services”

Taking these points in turn:-

• Rates “Provide significant level of revenue” – the same is true of any other tax and as noted above the economy and government stand to gain enormously from modernisation of the country’s telecoms infrastructure and a failure to maintain our competitive position by for example discouraging investment, is likely to damage the level of taxation revenues raised by harming the UK economy.
•  “Are highly efficient in collecting tax due” – this is quite simply not true, the system is highly inefficient both for the tax authority and the taxpayer – the efficiency of this tax could be greatly enhanced and other taxes could be amended to recover the sums raised from gigabit- capable broadband networks without any of the administrative inefficiency of continuing with the present system

There is a fundamental issue with the way property “rates” are levied on telecoms infrastructure in the UK. We agree with the CMA’s conclusion that the system as currently applied in the UK distorts competition between the incumbent operator BT on the one hand and BT’s rivals on the other. The system strengthens BT’s dominant position and impedes investment by BT’s rivals. This damages the UK economy since it is more difficult to invest here, makes it more difficult to compete with the incumbent than it ought to be and therefore restricts the impact of competition contrary to the interests of UK consumers and businesses. Ultimately the system helps to impede the delivery of the Government’s policy objectives for gigabit-capable broadband connectivity.

This distortion stems from the way in which the VOA has exercised its discretion over the assessment method to be used for each type of network.

The fact that the VOA is largely dependent on network operators declaring the extent and nature of their networks means the system is hopelessly inefficient but also gives scope for further distortion in the market. To complicate matters, since 2003 when telecoms licences were abolished, the number of companies and public sector organisations operating fibre optic networks has grown significantly. The rating system was quite simply not designed to cope with the range and number of networks which it is now required to assess. It is hardly surprising that the authorities are struggling to cope with this explosion in the use of fibre-optic networks. The current system is no longer fit for purpose and the time has come to design a fairer, more efficient system.

There is one further feature of the system which significantly assists BT. Although operators’ premises are generally assessed on the same basis as for every other type of business, if a site contains network equipment it is possible to have it designated as a network site in which case it forms part of the overall network valuation. In BT’s case, this is a particularly useful option since it has 6000 or so exchange buildings, often in prime locations. By including these in the overall network valuation, BT in effect avoids paying rates directly in relation to its exchange buildings and instead is rated on the overall profitability of the network.

By de rating fibre and ducts and sharing more equally with BT the burden of taxation borne by the buildings used by all telecoms operators, the Government could greatly simplify and streamline the rateable values system. This would remove at a stroke the market distortions identified by the CMA, the Select Committee and previous governments, and send a strong signal to the markets that the UK is serious about encouraging and facilitating investment in gigabit capable networks which we need. And all of this while broadly maintaining the current tax take. Not only would this benefit those investing in networks, it would reduce the cost and complexity of administering the system for the VOA by eliminating the complexity of appeals relating to apparatus hidden from view beneath the ground. No doubt some appeals would still be made in relation to buildings but evidence of buildings is easier to gather than proof of whether or not light has been shone through strands of glass encased in plastic under the streets.

Given the undoubted importance of digital connectivity to the health and wealth of the UK, it is surprising that the UK government should have a tax regime which acts as a disincentive to the introduction of new gigabit capable networks. The simplest way to reverse this position, and provide the strongest positive incentive to invest in new gigabit capable networks, would be to de- rate fibre assets altogether (i.e. both fibre optic cables and the ducts and poles which carry them). This change would encourage the rollout and use of further gigabit capable networks, and would maintain the majority of existing tax revenues from other telecoms network assets.

Although this change alone would result in reduced tax revenues in the immediate future, the stimulus to investment in the telecoms sector and the digital economy, and the positive stimulus that this would give the economy more generally, would mean that the loss was more than offset by growth in corporation tax, income tax and VAT plus carbon-related savings.

We estimate that removing gigabit capable networks (ie cables and associated ducts) from the defined hereditament would cost the Government some £290M per year in terms of rates revenue (before applying the above mitigations to reduce or eliminate the fiscal impact). This is a significant sum, particularly in the current climate but viewed in the context of other existing reliefs, it is a small price to pay to deliver the state of the art networks which the UK needs. For example other reliefs currently in place include:-

• Charitable relief £1.93bn a year
• Empty property relief £996m a year
• Retail relief £10bn this year (unusually high due to COVID 19)
• Rural relief £4bn a year
• Small business relief £1.26bn a year

The cost could in any event be offset by the cost savings gained by eliminating a significant source of appeals and assessing separately the operational buildings which communications providers use and which we believe are currently under rated by virtue of their inclusion within the overall rating assessment of the larger networks.

However, rather than simply removing gigabit capable networks and associated ducts from assessment, it would be open to Government to apply to BT’s buildings, the same rating methodology currently applied to the buildings used by others telecoms operators such as our members. By rating BT’s buildings as normal office or industrial buildings wherever the buildings could reasonably be used as office or industrial space rather than as a part of the network, the costs of derating networks could be offset. According to evidence led in the TalkTalk case the current rating arrangements mean that BT’s buildings are relatively speaking significantly under assessed in terms of rating.

In December 2001, BT sold all of its buildings (with the exception of its HQ and the BT Tower) to Telereal. The buildings, comprising some 5.5 Million square metres of space were then leased back to BT. It ought to have been simple for the VOA to calculate BT’s RV based on the market rents for similar properties.

Naturally the value of property varies over time but since BT’s cumulo assessment fell to as low as
£154M during the 2010 list, it is difficult to understand the assessments which were made of the rateable value if BT’s estate other than to assume that BT has for many years received a significant discount on its operational building assessments compared with its rivals. By assessing BT’s operational buildings on the same basis as all other communications providers, the government could offset the cost of removing gigabit capable networks from the rating system.

Again, we find it hard to disagree with the findings of the Treasury Committee when they noted that, “HM Treasury needs to revise the business rates system and implement change to support and encourage investment by businesses.”(9)

Rather than taxing fibre optic cables which are hidden underground ( which means the VOA is wholly reliant on the taxpayer declaring what assets exist) we believe that rating the operational buildings would ensure consistency of tax take for the Government while providing greater investment incentives in gigabit capable networks themselves. In addition, there would be savings to be made by implementing a more transparent and efficient tax system including a lower cost of operation for the Valuation Office Agency (VOA) by removing the need to assess millions of new fibre connections.

As the biggest operator in the UK, analysing the impact of reform on BT is the best way to assess the overall market impact. All of BT’s rateable assets – both network and buildings - are treated as one and currently valued at £524M for rating purposes. Their valuation fell for a number of years, dropping from £409.8m in 2008 to £156M during the 2010-2017 list but it then increased to the current value in 2017. Due to transitional relief BT will not pay the full annual amount due until 2021 and will have received £220M of cash benefit from the transitional relief system No details are published of how the VOA reached this revised figure. However, given the comparators that are available, it is difficult to reach such a low valuation. For example, BT’s annual reports suggest it pays rent of over £230m per year on its buildings to Telereal. RV is usually measured by the actual rents when such data is available. This would suggest that the RV of BT’s property should be at least £230m. Therefore, the VOA has either significantly under-valued BT’s network assets or they have used a RV of the property which is considerably below the actual rent being paid by BT. Moreover, we understand that the commercial deal between BT and Telereal was complex and involved huge initial cash payments and significant staff transfers so the reported rental may not reflect the full market rental value. In fact, we estimate that BT occupies at least 30M square feet of operational building space which, if valued at, an average rental value of say £20 p/s/f would imply a rateable value of £600M.

Based on these figures, by separating BT’s network and buildings, and zero rating BT’s and all other gigabit capable networks, the Treasury would only be required to forego a minimal amount of rating income - a small price to pay to boost full fibre investment in the UK.

We are proposing that the Government should remove the current tax on gigabit capable networks as soon as practicable. This is the simplest way to correct an overly complex taxation system that is clearly failing to keep pace with the changes in technology, and is no longer working in the best interests of the UK.

This is not about shifting the current tax liability away from one set of competitors, only to mean that the liability then rests more heavily elsewhere. It is about creating a simpler, fairer and more efficient taxation system, a system which is more cost effective for the Government and which is simpler to operate for the taxpayer. This is about creating a better investment and competitive environment for all investors and operators, and thereby allowing this industry to deliver on its potential sooner rather than later.

Unlike other taxes, rates are not uniformly applied to all communications providers thereby distorting the market, something which we believe acts as a significant brake on investment, thereby threatening to compromise the government’s gigabit broadband objectives.

The question of whether the rating system distorts competition was considered at length by the Competition and Markets Authority in TalkTalk Telecom Group plc v Ofcom (10). In that case the CMA and Ofcom both agreed with TalkTalk’s contention that the rating system distorts competition. For example at para 4.77 the CMA noted that,

“We therefore conclude that TalkTalk has demonstrated that there is a material differential between OCPs’ NDRs and the attribution of BT’s NDRs in respect of the significant majority of circuits”

This is an issue which UKCTA and its predecessor trade body have argued for almost twenty tears needs reform. Others agree with this view. For example, the first report of the Broadband Stakeholders Group called for action on the distortive impact of the business rates system. This led to the then government committing to the House of Commons that the system would be reformed. The government then established an expert group to undertake a comprehensive review. The draft report from this group was produced in 2004 and was summarised in an interim status report produced by the Broadband Stakeholder Group. This is attached at Annex A.

The expert group recommended that the Government establish the following guiding principles:-

• Rating should be consistent with stated EU and Government objectives in relation to the achievement of the information society, including the broad economic objectives, pro- investment objectives (including the granting of Rights of Way over public and private land); and the sector-specific technical policies such as Local Loop Unbundling and whatever conclusions are drawn from the current Strategic Review of Telecoms being undertaken by Ofcom.
• The business rates burden should be consistent with the concepts of affordability, proportionality, geographic consistency and technological neutrality in relation to the converged communications sector.
• There should be maximum transparency in relation to process/procedure and any information that is not commercially sensitive to the operator concerned.
• There should be no material distortion of competition and no unnatural barrier to market entry, and where direct comparators exist, equivalent approaches should be used.
• The aim should be for simplicity of valuation methodology leading to ease of administration and matching of VOA administrative resources to planned need.
• The aim should be to achieve regulatory and legal certainty as a stimulus for the considerable capital investment that is foreseen for the UK communications sector over the coming years. This would point to (a) pre-agreement in a forward-looking sense (b) removal of as much as possible of the financial risk associated with the acknowledged historical problems.

The group’s report on the competition problems arising from the asymmetric treatment of CPs did not lead to the removal of those distortions. Instead, having identified shortcomings in the rating system, rather than undertake the root and branch reform suggested by an expert group, successive governments have pursued a policy of layering on top, further complexity and short- term reliefs. There has been no systematic reform of the regime even though the UK has already been left behind in terms of full fibre network deployment by many of its competitors.

The system of short term relief introduced England and Wales from April 2017 to April 2022, while welcome as a very short term measure may yet cause serious issues for some providers since it is not clear what bill will have to be paid in 2022, in short industry will face a significant degree of bill shock in 2022. For BT there will be no immediate bill shock as BT’s rates assessment will only increase if the VOA is able to directly link increased profits to new fibre.

This is just one more illustration of the highly distortive effect of the system. It is simply not acceptable that different operators pay different amounts on the same property asset (often because different operators have different valuation methods). A good example of this is leased lines – if Openreach sell a leased line then BT pays tax on the element of profit derived from that sale. If Openreach sells dark fibre to another provider, that wholesale customer pays tax and it is circa five times the amount paid by BT, with which that wholesale customer is trying to compete. In short, brief rates holidays, although better than nothing, are no substitute for a better tax.

We believe that now is the time to take the steps first suggested in the Government review of 2002 and gigabit capable network cables and their associated ducts from the scope of rating.

Chapter 3 (abuse) – the current system is ripe for abuse as it is based on an assumption that those paying the tax can be trusted to declare exactly what they have put in the ground and brought into service or sold/leased out. It is virtually impossible for the VOA to police as the assets cannot be seen.

The fact that the VOA is largely dependent on network operators declaring the extent and nature of their networks means the system is hopelessly inefficient but also gives scope for further distortion in the market. To complicate matters, since 2003 when telecoms licences were abolished, the number of companies and public sector organisations operating fibre optic networks has grown significantly. The rating system was quite simply not designed to cope with the range and number of networks which it is now required to assess. It is hardly surprising that the authorities are struggling to cope with this explosion in the use of fibre-optic networks. The current system is no longer fit for purpose and the time has come to design a fairer, more efficient system.

As to frequency of revaluation, our main concern is that the taxation system should be fair, proportionate, transparent and predictable. The valuation of optical fibres and associated network elements can vary considerably in line with prevailing market conditions which would imply shorter revaluation periods. But, if our suggestion is accepted that gigabit networks be removed from future assessments, then what would remain would be real estate that could be revalued in line with other sectors which could justify revaluation cycles of 5 years or longer.

Chapter 4 (transitional relief)
The fact that the regular 5 year cycle of assessment, coupled with transitional reliefs has been disrupted when the 2000 List was extended to 7 years has caused further uncertainty for industry. We believe that the VOA ought to return to some sort of regular cycle and that this ought to be set in legislation. The Government had already tabled legislation prior to the 2019 election which would have established a 3 year cycle of assessments. We would welcome the certainty for planning purposes that this would bring but we have serious concerns that in the absence of the sort of simplification of the system which we have suggested, it would not be practical without significant additional resources being put into the VOA.

We also believe that downward transitional relief should be scrapped so that businesses can benefit from lower valuations immediately they are settled by the VOA and that upward transitional relief should remain but should instead be funded out of general taxation, as is already the case in Wales.

Chapter 5
The system of appeals, despite attempted reforms in recent years is highly inefficient – in our sector appeals against rating assessments are almost automatic, and the appeals then take years to deal with. This is not in the interests of the authorities or the rate payers. In some cases it has taken in excess of 10 years to clear cases. Reforms in recent years (the Check Challenge Appeal process) have not helped and have if anything made the system slower. We believe the following steps could be taken to improve matters: -

• the system should be made easier to navigate.
• The 12-month period that the VOA has to respond to a ‘check’ should be shortened to 6 months.
• The 18 months that the VOA has to respond to a challenge should also be shortened to 6 months, as recommended by the Treasury Select Committee in their recent report on business rates.
• The VOA should release all the evidence they plan to rely on at the submission of a challenge by the ratepayer.

It is vital that the UK has the high-speed fibre-based communications infrastructure which will allow our industry and citizens to compete in the global knowledge based economy. However, there is growing concern that we are falling behind our competitors in this regard.
We would suggest that Government and industry should establish a set of guiding principles along the lines of the following, which we have updated from those set out in 2004 by the then Government’s expert group tasked with looking at the operation of rates in the telecoms sector:

• Rating should be consistent with stated Government objectives in relation to gigabit capable connectivity for all by 2025.
• The business rates burden should be consistent with the concepts of affordability, proportionality, geographic consistency and technological neutrality.
• There should be maximum transparency in relation to process/procedure and any information that is not commercially sensitive to the operator concerned.
• There should be no material distortion of competition and no unnatural barrier to market entry, and where direct comparators exist, equivalent approaches should be used.
• The aim should be for simplicity of valuation methodology leading to ease of administration and matching of VOA administrative resources to planned need.
• The aim should be to achieve regulatory and legal certainty as a stimulus for the considerable capital investment that is foreseen for the UK communications sector over the coming years. This would point to (a) pre-agreement in a forward looking sense (b) removal of as much as possible of the financial risk associated with the acknowledged historical problems.

We are proposing that the Government should remove the current tax on gigabit capable networks as soon as practicable. This is the simplest way to correct an overly complex taxation system that is clearly failing to keep pace with changes in technology, and is no longer working in the best interests of the UK. All of the alternatives we have set out above are also flawed and represent to varying degrees, brakes on investment in critical national infrastructure.