Ofcom proposes UK wholesale pricing cuts

11 Jul 2013

The UK telecoms regulator Ofcom has begun a consultation into proposals to cut the wholesale prices that incumbent fixed line operator BT charges to internet service providers (ISPs) for wholesale access to its networks. Ofcom says the cuts will be linked to inflation (CPI), and will apply from 1 April 2014 until 31 March 2017. The annual rental of a fully unbundled line will fall by between CPI minus 0% and CPI minus 6% each year, according to the watchdog’s proposals; the current annual cost is GBP84.27 (USD127). Shared unbundled lines, meanwhile, will see the cost fall from GBP9.75 per year, with proposed cuts of between CPI minus 8% and CPI minus 12% every year. Finally, the cost of wholesale line rental (WLR) – GBP93.27 a year at present – will drop by between CPI minus 2% and CPI minus 8% annually. However, Ofcom notes that some of the changes would only apply to parts of the market where BT has been deemed to have Significant Market Power (SMP) in the delivery of broadband services – usually rural areas or locations where there is little competition from rival ISPs.

Meanwhile, Ofcom is proposing changes to the areas of the country where no market regulation is needed. The watchdog conducted its last review in 2010 and now says: ‘the area of the UK with effective competition has grown in the last three years from 78% to 90%’. It plans changes to market definitions, with the number of defined markets falling from four to three: Market A (only one or two broadband providers present – 9.6% of premises in the UK, predominantly rural areas); Market B (three or more ISPs present – 89.7% of premises); and the Hull area (KCOM is the sole provider – 0.7% of UK premises). Ofcom says the whole of Market B would be unregulated as there is already effective competition which ensures that prices for end users are determined by market forces.

United Kingdom, BT Group (incl. Openreach)