Ofcom to force down wholesale broadband costs, but BT disputes decision

The UK telecoms regulator Ofcom has said it will be forcing down the prices that Openreach, the wholesale division of incumbent BT, can charge for broadband and telephone rental. However, BT intends to contest the decision.

The proposed charge controls would reduce the cost of a “fully unbundled line” from £91.50 to £87.41, while a shared unbundled line, where an ISP uses the line just to provide broadband, would drop from £14.70 to £11.92. The cost for phone rental services would drop from £103.68 to £98.81.

Ofcom said it has provided the European Commission with a draft of its decision, which it deems necessary due to Openreach’s significant market power. The charges would be imposed for the 2012/13 financial year and would run until 31 March 2014. Prices could decrease further in line with the Retail Price Index. The charges will only kick-in once they have been approved by the European Commission, which Ofcom said would occur in March.

How this will affect consumers is unclear as the Ofcom proposals do not force the purchasers of Openreach’s wholesale services to pass on savings to their customers. If they do however, it could mean customers of Openreach based broadband would see price drops.

However, BT has hit back at Ofcom over the decision, issuing a statement of its intentions, which could include appealing the decision.

“We disagree with some of the underlying assumptions that they have used to determine these charge controls. Our primary concern throughout this process is to ensure 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,” read the statement.

“We will consider all options available to us, including appealing, after Ofcom confirms its final decisions.”

Last week, Openreach announced that it would make Fibre-to-the-Premises (FTTP) services available in six locations in the UK from late October, making download speeds of up to 110Mbps available, with 300Mbps upgrades coming by spring 2013.

The Broadband MEA conference is taking place on the 25-27th March 2012, at the Westin Mina Seyahi Beach Resort and Marina, Dubai, UAE. Go to the website now to register your interest.