Ofcom confirms new wholesale fixed line charges

8 Mar 2012

Having last month notified the European Commission (EC) regarding provisional new charge controls for a number of wholesale fixed line services provided by BT’s wholesale division Openreach, UK regulator Ofcom has announced that it has now formally set the new pricing structure. The watchdog noted that the proposed charges remain unchanged from those submitted to the EC, with Ofcom reiterating that the charges were being regulated as fixed line incumbent BT is judged to hold significant market power (SMP) in the delivery of the services in question.

Ofcom has confirmed that the charges will take effect from 1 April 2012, and as per the new pricing regime the annual cost of a fully unbundled line will drop to GBP87.41 (USD138.16) per year, down from the current cost of GBP91.50. Looking forward, this fee will then decrease further in the following financial year (from 1 April 2013), with the reduction calculated using the formula of retail price index (RPI) -5.9%. A shared unbundled line, meanwhile, which currently costs GBP14.70 per year, will be reduced to GBP11.92 for FY2012/13, before falling further in the following fiscal year by RPI -15.9%. Rounding out the regulator’s price revisions, Ofcom has also confirmed that the cost of wholesale line rental (WLR) would be reduced to GBP98.81 per annum from its current rate of GBP103.68 from March 2012, with a further reduction due in FY2013/14 using a formula of RPI -7.3%.

On the back of the ratification of the new charges, Ofcom has said that it expects the new prices to ‘lead to real term price reductions for consumers, as communications providers pass on savings to their landline and broadband customers’. In confirming its regulatory decision, Ofcom also highlighted that the number of local loop unbundled (LLU) lines in service had increased from just 123,000 in September 2005 to more than eight million today, while there are now some 6.2 million WLR connections in the UK in addition.

BT, meanwhile, has indicated that it may challenge the ruling, with Techweek Europe citing the telco as saying: ‘As expected, following last month’s draft statement, Ofcom has today published the final charge controls for the Openreach LLU and WLR portfolio … We continue to disagree with some of the underlying assumptions they have used to determine these controls with our primary concern being that we are able to achieve a fair rate of return in order to continue our investment in the future of the UK’s communications infrastructure.’ BT has said it will consider all options open to it, including appealing the new charges.

United Kingdom, BT Group (incl. Openreach), Ofcom