Ofcom to push BT for lower broadband prices

Wholesale rental fees to be reduced, although Ofcom is still awaiting approval

February 7, 2012
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Ofcom has announced another round of tinkering to BT’s wholesale phone and broadband charges.

Openreach is BT’s wholesale division which deals with other ISPs and local loop unbundling that allows those providers to rent their own equipment at exchanges in order to deliver phone and broadband directly to customers.

And Ofcom keeps a close eye on Openreach, which has a dominant position in the UK market, or as Ofcom puts it, a “significant market power”.

The latest move to push BT to charge other ISPs less is a more forceful one, and should knock the price of both broadband and phone rentals from third parties down considerably over the next couple of years. Assuming they pass these wholesale reductions onto customers.

Ofcom is proposing that in April, the cost of a fully unbundled phone and broadband line should be reduced from BT’s current charge of £91.50 per year rental, to £87.41. And that’s set to drop a further 6% the following year.

The price of wholesale broadband will be knocked down from £14.70 per year to £11.92, and is set to drop a further 16% the following year, potentially meaning it will be a tenner come spring 2013.

In theory that could mean a near £5 drop in the price of broadband packages, depending on exactly how much of the cut gets passed on.

However, this proposal is still a draft one which has gone to the European Commission for approval. A final decision is expected to be made next month.

BT isn’t happy and feels the reductions, while in line with expectations from last year, are at the heavy end of Ofcom’s available scale of measures.

BT argues that the cash drain will mean the company has less to invest in rolling out its fibre infrastructure to the rest of the UK which currently doesn’t benefit from super-fast broadband.

However, BT’s coffers are hardly looking unhealthy, with the firm recently reporting a near 50% jump in profits.






 

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