Ofcom Demands Cut In BT Broadband Price

Broadband and phone charges in the UK should come down in the autumn, as telecoms regulator Ofcom has proposed that BT’s Openreach division should cut its wholesale prices.

Ofcom’s  latest regular review of BT’s wholesale charges suggests that the price of broadband be cut in real terms by around five percent, in a consultation document. The consultation ends in June, and the new prices should be enforced in autumn, with all ISPs expected to pass the reduction on to customers.

ISP costs to fall

BT Openreach does very good business in broadband, and recent good results for BT as a whole were boosted by strong broadband demand. It is also offering 110Mbps broadband through access to its fibre.

The operator’s prices are pegged to the retail price index (RPI), but Ofcom suggests they should rise by less than inflation producing a fall in real terms, because the cost of providing the network is falling.

The consultation document sets a range of prices so, for instance an SMPF (broadband only) line will cost ISPs between £13.50 and £14 per year under the new rules. Since the current price is £15.04, and the RPI is going this will be a cut of roughly 13 percent over the price that BT might otherwise have charged.

Because Openreach has a virtual monopoly on copper phone lines in the UK, Ofcom sets the prices by which it rents those lines to competing service providers. The agreement is reviewed every four years.

During the course of the agreement just coming to a close, TalkTalk protested at the cost of wholesale lines, and a ruling by the Competition Appeal Tribunal forced Openreach to lower its prices. ISP customers of BT are expected to lobby Ofcom for prices nearer the low end of the ranges it suggests.

Openreach is in the process of moving its ISP customers from one wholesale line rental scheme, WLR2, onto a new one, WLR3 which offers better fault handling and quicker installation. In the next three months various functions will be withdrawn until all the WLR customers are moved across.