Ofcom proposes new pricing rule for BT’s wholesale fibre offerings

15 Jan 2015

British telecoms regulator Ofcom has unveiled new measures which it says are designed to promote competition and investment in the superfast broadband market. Under a draft decision notified to the European Commission (EC), a new pricing rule would mean that fixed line incumbent BT would be required to ‘maintain a sufficient margin between its wholesale and retail superfast broadband charges in order to allow other providers profitably to match its prices’. This new pricing rule would, however, preserve the telco’s existing flexibility to set its wholesale fibre prices, Ofcom noted, saying that this would in turn provide an incentive for future investment by BT in its fibre infrastructure, while ensuring it could not set prices ‘in such a way that might prevent other operators from competing profitably for superfast broadband customers’.

With BT currently obligated to allow other operators to use its network to sell superfast broadband to consumers under a process known as ‘virtual unbundled local access’ (VULA), as per the draft regulatory condition notified by Ofcom to the EC the incumbent must ensure that the margin between its wholesale VULA charges and its retail superfast broadband prices is sufficient for rival operators to compete and make a profit. Ofcom’s indicative assessment is that BT is currently maintaining a sufficient margin under the new draft rules.

In announcing the development, Ofcom noted that there were just 100,000 customers taking superfast broadband services when it introduced the requirement for BT to allow other operators to use its upgraded fibre network. With there now being some 3.4 million such subscribers, and with uptake expected to increase further in the coming years, the regulator said that the draft decisions are ‘aimed at ensuring that different operators can compete in the developing broadband market in years to come, so that consumers benefit from competitive prices, network investment and high-quality, innovative services’.

All measures are subject to review by the EC, following which Ofcom expects to publish a final statement in February 2015, with the new regulatory condition to commence from the start of the following month and remain in place until March 2017, when the current regulatory review period ends.

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