BT Group has announced plans to slash the prices it charges its rivals for wholesale broadband access by up to 70%. The UK’s dominant telco has said that from 1 June 2004 it will reduce the monthly rental price for its shared local loop unbundling (LLU) product from GBP4.42 to GBP2.26 per line, with connection fees falling from GBP117 to GBP83.33. Whilst this only represents an initial saving of 35% on current prices, the operator has said that it will install further cuts to take the saving to 70% once the volume of demand increases sufficiently.
BT claims it is implementing the changes in a bid to reduce over-regulation of the market and boost competition. The move has been welcomed not only by regulatory body Ofcom, which recently undertook an investigation into BT’s wholesale prices, but also by the UK’s ISPs who should, in theory, be able to increase the range and transmission speed of the services on offer whilst also reducing the end prices they charge consumers. However, sections of the analyst community have warned that the main beneficiaries of the changes will be the service providers themselves, with consumers probably only witnessing a small reduction in their monthly bills. They have also been at pains to point out that the UK broadband sector, and indeed Ofcom, still have a long way to go before tariffs in the sector match those in several of western Europe’s advanced broadband markets, such as France, where tariffs are up to five times cheaper.
Nevertheless Ofcom chief executive Stephen Carter welcomed BT’s initial move to redress the balance, claiming that the proposed first stage of cuts would take the UK from being the second most expensive European country for LLU access charges, to the fifth cheapest. Speaking to reporters yesterday Mr Carter claimed that the UK’s initial attempts at LLU were flawed in terms of the prices offered and the processes implemented. As a result, with just over 5,400 unbundled local access lines in the UK at the end of 2003, compared to 1.35 million in Germany, BT has retained a firm grip on the sector, with its only real competition coming from the nation’s two leading cable TV operators, NTL and Telewest.