Tuesday, 26 August 2014

Scottish Broadband?

We don't currently offer services to people in other countries. We are simply not set up to do that.

If Scotland did become a separate country, what would that mean?

From a simple engineering point of view, we would not expect much to change. I am sure BT would continue to offer services in Scotland, or set up a separate company to do so, and would still provide the same sort of backhaul to allow us to offer services. The engineering is likely to be simple - good!

But trading with a different county has a lot of possible implications.
  • We may have to be VAT registered in that country, and collect and pay VAT to their VAT office.
  • We may have to pay corporation tax to that county.
  • We may have to do currency exchange on payments.
  • We may have to pay surcharges on international bank payments even if in same currency.
  • The legal implications if someone did not pay, and how we would sue them, could get a lot more complex.
  • We may have to be part of that countries ADR scheme.
  • We may have to deal with their telecoms regulator.
  • Shipping routers may cost a lot more and may involve customs.
Broadband is not a high margin business at the best of times, and all of this extra burden is a cost that may mean it is simply not viable for a small ISP to bother.

Obviously we can't say for sure what would happen - nobody knows the details, assuming Scotland even votes for a split, but it sounds like hassle to me.

So I wonder how many ISPs and other service businesses based in England would simply cut off Scotland, just because of simple commercial common sense.

One also wonders on impact for the likes of BT. The currently have a universal service obligation so the considerable extra costs of serving some Scottish islands are aggregated over the whole business. With no OFCOM, they may be able to charge Scots the actual cost of serving those communities. That may, of course, mean we have to pay a lot more for tails in Scotland too.

22 comments:

  1. One would presume that Scotland would remain part of the EU, so I'm not sure VAT is a problem (I don't think there are any kind of special measures needed with VAT when selling across EU borders - you just handle VAT as you would for domestic customers don't you?)

    Corporation tax - again, unless you actually set up a Scottish company, I don't see why you'd need to pay corp tax to Scotland. You're just a UK company exporting products to Scotland (and again, if Scotland is in the EU, presumably no duties to be paid either).

    Things would certainly be a lot more complex if Scotland (or the UK) exits the EU at some point though.

    I can't really see most ISPs wanting to lose a big chunk of their customers in one go though. They might increase prices slightly to cover any extra costs, but on the whole it doesn't sound like a big deal to me. OTOH, it would give local Scottish ISPs a bit of a boost, so you might not find too many Scots complaining. :)

    I'm not really sure where I stand on Scottish independence (I'm not Scottish and I don't live in Scotland - I've not really been following the debate too closely). I have, however, thought for a long time that Westminster is far too disconnected from the needs of a lot of the population of the UK and there could be a lot of merit in devolving a lot of powers to more regional governments - possibly not as fine grained as individual councils, but splitting the country into South East England / South West England / North England / Wales / Scotland / Northern Ireland could make sense. I don't mean to split the nation into wholly independent states, but to move *some* decision making into the regions. I really don't think that Westminster is especially good at understanding what people outside of London want.

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    1. VAT can be complex - depends where the service is located and that can depend on interpretation of VAT offices (which may not agree even) and the fact we'd have to find that out even is part of the problem. Even in EU services and goods are (or at least were) handled differently, and there are rules for not charging VAT to a VAT registered customer in the other county in some cases (for actual exports). The issue is not exporting products - it is providing services in that county - if we don't pay corp tax we are tarred with the same brush as vodafone by the public as being tax avoiders. This is something I am sure is being discussed in lots of businesses though. Losing Scots customers would not be ideal but this is a low margin business. We already have extra costs as a lot of Scotland is only 20CN and this extra hassle is what makes it unprofitable, or may do.

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    2. Steve,
      You want to introduce another level of Government? We need less government, not more!
      Anyway, they tried it (Regional Government) but scrapped it again (see http://en.wikipedia.org/wiki/Regions_of_England). Note that they scrapped their powers, but left the structure, so there's more politicians on the gravy train than ever.
      In any case, Central Government already tells councils what to do, despite the fact that we elect the councils, so they wouldn't let go of any power, just order others to do their (fill in adjective) work for them.
      As for "I really don't think that Westminster is especially good at understanding what people outside of London want", you don't need the words "outside of London" - they don't represent the needs/wants of Londoners either! I used to work within the sound of Big Ben and I can tell you "they" didn't do what I wanted any more than what Geordies (or anyone else) wanted. The current mob do what their business partners want!

      Sorry, a bit of a hot button for me...

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    3. RevK: I don't see this as tax avoidance. A company that is, and always has been, based in a particular country, operates no offices in another country should be free to export products/services to another country without being accused of tax avoidance.

      The tax avoidance issue with many of the large corps is that they _do_ operate offices in countries that they actively avoid paying tax in. They want the best of both worlds: to be able to operate an office and get all the benefits that that entails, but they don't want to pay the taxes associated with doing that.


      HDRW: I am the last person to promote "more government". But I do think we want *more appropriate* government and I'm extremely unconvinced that concentrating all the power in a single location, that is a vastly different environment to the majority of the country is bad and leads to inappropriate government.

      The call for "less government" sounds like the free market folks in the US, and we can see exactly how well that works on the likes of high speed internet connectivity, healthcare, employee protection, etc.

      Lets not shout about "over government" and throw out all the regulation - much of what we've got is really good. What we need to do is ensure that regulation is appropriate and serves the needs of the population at large. And yes, that may well involve modifying regulations on a regional basis.

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    4. Well not actually - if they have offices in that country they pay a lot in business rates, VAT, fuel tax, employers NI and lots of tax - yet get accused by the masses of tax avoidance. A company that sells to, and makes money from, Scotland but pays no tax in Scotland, not even VAT, would be accused of something by the masses I am sure.

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    5. I find the recent vitriol about tax avoidance particularly irritating. Of course anyone sane pays the minimum amount of tax the law allows, what else do you expect?! I pay A&A £40 a month on Home::1; if I wanted, I could get exactly the same service on the units-based tariff for £50 or so - is this "tariff avoidance"?

      Steve, as RevK points out, Vodafone and co pay vast amounts to the Treasury and other bits of government: one sixth of every retail sale in VAT, a chunk of all the staff salaries in NI, business rates on all their premises, the billions they handed over for wireless spectrum licences - corporation tax is really a very small piece of the picture.

      In fact, as I recall one of my own two employers (the one which isn't a university) hasn't paid a penny of corporation tax or business rates in the decade it has operated! (Thanks to R&D tax credits, a financial downturn or two and having an office small enough to be fully exempt under Scottish "business rates relief".) I sometimes wonder if all the "Uncut" people would move on from Vodafone stores (paying "too little") to small local businesses, which will often be paying nothing at all, if they knew the real situation...

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  2. Maybe their tax structure will be more attractive and you can do an inversion. =)

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  3. I'm not Scottish born but I have lived in Scotland for 9 years and will be voting. I will most likely vote no but I must admit that I'm a lot closer to yes than I first thought I would be. As one of your customers, I had been wondering about what might happen to my service in the event of a yes. I would like to think that you truly value our custom but I can understand if it becomes infeasible.

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  4. i wonder if the aaisp sims will only use the eu profile when in scotland rather than o2 and eu?

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  5. How would suing people be harder? You already have to deal with a completely separate legal system in Scotland.

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  6. VAT could make for a slight complication, needing to split out non-UK customers (assuming you don't have this already for anything like SIP2SIM?). Currency should be a non-issue (as one dim bulb claimed, Scotland gets to keep the pound sterling because Stirling is a Scottish city... in reality, it can still use the pound, interest rates will still be set in London anyway). On the bright side, once you bite the bullet and trade beyond the UK's borders, perhaps you'd get extra customers for L2TP tunnel termination and hosting, and perhaps SIP2SIM too?

    Banking could actually be more complex than it seems, though. My own A&A services (in Scotland) are paid by direct debit from the *Halifax* Bank of Scotland, which is part of Lloyds Banking Group plc. Is that a Scottish bank or not? (Of course, there is only the UK clearing system at present; if Scotland were to start setting something separate up, we'd have plenty of time to figure out the implications for us all. My guess would be they'd stick to the existing arrangement anyway.)

    As Niall points out, Scotland already has a totally separate legal system to England; separating could actually help you there, enabling use of the "European Small Claims Procedure" rather than needing to find a Scottish solicitor, as would be the case now (Civil Jurisdiction and Judgements Act 1982).

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  7. Maybe Alex Salmond will bring BT Scotland back into a renationalised post office ?

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    1. Well, nationalising the infrastructure is another concern and may make it infeasible to offer ISP services!

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    2. I don't know - I've thought that nationalised infrastructure could be the solution (electric/gas/water/phone) if they kinda worked on the Nominet model. No direct selling to consumers and if more than x% of "stakeholders" request a feasible tech - such as FTTP - then they've got to implement it).

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  8. I'm not sure that nationalised infrastructure is that different from what we have already (with BT essentially having a monopoly on local loops, exchanges and cabinets, as far as non-Virgin ISPs are concerned). Nationalising it would probably result in very little change, but they (would|should) no longer have a focus on profits, which would probably be a good thing.

    (Although government certainly seems to be focusing a lot on profit these days so that isn't a given)

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  9. "if they have offices in that country they pay a lot in business rates, VAT, fuel tax, employers NI and lots of tax - yet get accused by the masses of tax avoidance."

    Vodafone, Amazon, Google, "pay a lot in business rates, VAT, fuel tax, employers NI and lots of tax" ?

    I think not. Vodafone told HMRC how much they were willing to pay and HMRC/Vodafone robbed the missing chunk from the rest of us.

    OK these companies are big enough to employ expensive tax lawyers, which Joe Public on PAYE and your average small/medium enterprise with no opportunity for tax dodging can't usually do.

    *THEN* when Joe Public see how much these huge companies are taking out of the UK econmy and how little they put back, Joe Public entirely understandably gets upset about tax dodging on a massive scale.

    I don't think AAISP are quite in the same category.

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    1. I was under the impression that they legally adjusted corp tax. It is hard to see how anyone avoids VAT or employers NI or fuel tax. I mean when you fill up a van with petrol how do you not pay a shit load of fuel tax?

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    2. The whole trumped-up complaint about Vodafone was about corporation tax - a total of 8% of the government's income, including all of the North Sea oil revenue. They channel in vast amounts of VAT (one-sixth of all their retail turnover!), fuel tax, business rates on all their premises (while small businesses like mine get a free ride), employer's NI - and, of course, all those billions they handed over in the 3G scalping.

      The government could actually abolish corporation tax entirely with no more than minor tweaks to the rest of the tax code to offset that. Meanwhile, if the public understood just how much money the government hoovers out of big business, they'd have a very different attitude!

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  10. "all those billions they handed over in the 3G scalping."

    Excuse me? You're having a laugh.

    UK 3G licences were sold by auction.

    The cellcos chose exactly how much to bid, and they chose very very badly, as anyone who could do arithmetic could see at the time.

    Anyone with a clue could work out the potential number of 3G subscribers, multiply by a plausible ARPU (average revenue per user), and multiply again by the number of years over which the cellco would be expecting to recover their costs. That number needs to cover not just licences but infrastructure and operating costs.

    Any sensible person doing that sum would come up with a number orders of magnitude smaller than the £20BN+ (yes, twenty billion) that the cellcos voluntarily paid for 3G licences a decade and a half ago.
    http://news.bbc.co.uk/1/hi/business/727831.stm


    I don't quite follow your description of VAT either. Joe Public pays VAT on stuff they buy, end of story. Businesses pay VAT on stuff they buy and then reclaim the VAT they paid. Businesses also collect VAT on behalf of HMG on stuff they sell. Gross oversimplification, but no worse than yours.

    "The government could actually abolish corporation tax entirely with no more than minor tweaks to the rest of the tax code to offset that."

    That low-tax idea worked so well for Ireland didn't it.

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    1. Really, whatever label you put on each chunk of tax, it's all ultimately extracted from their customers. The 3g auction was specifically designed to maximise the money gouged out of mobile customers - and only "voluntary" in the sense that remaining in business is voluntary! Ultimately, those billions came out of *our* pockets through our mobile phone bills - which is why I object to them, and why the mobile companies didn't care as much.

      I wasn't suggesting a "low tax" anything - just that the government could easily remove a small and rather arbitrary tax, replaced with a small increase in one of the main tax rates instead. No more whining about "dodging" anything, HMG still gets the same revenue, end of problem.

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  11. I have just two things two say concerning this 1. Help 2. Heeeeeeellp!

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  12. Please may I pay whatever additional amount is required so that I may be allowed to remain an AA customer.

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