Ofcom Starts Cutting Broadband Prices

Ofcom has proposed that BT Openreach cut the wholesale prices of broadband.

British telecoms regulator today revealed a proposal that if approved could see  price reductions for consumers of companies like Sky and TalkTalk. Ofcom regulates BT Openreach’s wholesale prices because it represents a significant market power in the delivery of these services and the regulator's most recent proposal is the third time that Ofcom has set wholesale prices for these services. The idea is that by cutting BT's wholesale prices, providers that use BT's network (like Sky and TalkTalk) will pay less and these savings will trickle down to the consumer level.

The proposed regulations would affect wholesale charges for telephone and broadband services delivered by BT's network in two ways. The first is Local Loop Unbundling (LLU), which sees providers use their own equipment in BT exchanges, taking over the line. The second is Wholesale Line Rental (WLR), in which telecoms providers simply rent lines from BT in order to provide customers’ phone and internet services.

Ofcom's new pricing would see a drop in LLU pricing amounting to between 1.2 per cent and 4.2 per cent every year from now until 2014. WLR is also going to see a drop, with Ofcom proposing a price reduction of between 3.1 percent and 6.1 percent every year. Current LLU and WLR pricing is set at £89.10 and £103.68 per year, respectively.

Ofcom's proposal also included dropping the price of a shared unbundled line to a property, where an ISP uses a proportion of the line only for the provision of broadband. The dip in pricing in this instance amounts to between 11.6 per cent and 14.6 per cent, with the current price ringing in at £15.04.

The proposal is just entering the consultation process (Ofcom will release a statement in the autumn detailing the specific prices that have been settled upon with BT), and BT, naturally, has some concerns which it plans to discuss with the regulator over the coming months.

"BT invests more than any other company in the UK’s communications infrastructure, so it is critical that it is able to achieve a fair rate of return in order to continue its investment in copper and fibre based services," the Register cites the telecoms giant as saying.

"Upon initial review, we are encouraged by Ofcom's recognition of this fact, but would question some of the underlying assumptions being used. As a result, we will be raising such concerns with Ofcom during the consultation process."

Read more on Ofcom’s proposal on the Reg.