Ofcom reveals wholesale broadband pricing proposals

20 Jan 2011

The UK’s telecoms watchdog, Ofcom, has unveiled a raft of proposals that it claims could mean better value broadband services for those in rural areas. The regulator has put forward a number of price reductions that will limit how much fixed line incumbent BT can charge internet service providers (ISPs) in certain parts of the country. The price cuts range between 10.75% and 14.75% below inflation, and Ofcom has said that it expects enhanced competition between retail ISPs as a result of the proposals to in turn lead to lower costs for consumers.

Claiming that the move could benefit nearly 12% of, or around three million, UK homes and businesses, mostly in rural areas including parts of Scotland, Wales, Northern Ireland, South West England, Norfolk, Yorkshire, Cumbria and Northumberland, Ofcom has not proposed any charge controls in regions where it considers there is adequate competition. In its proposals the regulator noted that it had determined four separate geographic markets in the UK, with those being: the Hull Area (0.7% of the UK premises); Market 1, exchanges where only BT is present (11.7% of premises); Market 2, exchanges where two Principal Operators (POs) are present or forecast and exchanges where three POs are present or forecast but where BT’s share is greater than or equal to 50% (10.0% of premises); and Market 3, exchanges where four or more POs are present or forecast and exchanges where three POs are present or forecast but where BT’s share is less than 50% (77.6% of premises).

Under Ofcom’s proposals, BT Wholesale will only have to reduce charges to ISPs in Market 1, while the regulator has also confirmed that it does not intend to apply the new controls to BT’s ADSL2+ services, instead imposing the lower costs on just its ADSL Max (up to 8Mbps downlink) product.

A consultation has been opened for feedback on the proposals, with submissions due by 31 March 2011, and the regulator is expected to issue a further statement on the matter in the summer. The charge reductions, if approved, are expected to run for three years, to end-March 2014.
United Kingdom, BT Group (incl. Openreach), Ofcom