Ofcom proposes BT wholesale rural price cuts - ZDNet UK

Ofcom has recommended that BT cuts its wholesale prices for ISPs that use its infrastructure to deliver broadband to rural areas.

BT should cut its wholesale prices by between 10.7 percent and 14.7 percent, after taking inflation into account, for areas where it is the sole provider of wholesale broadband services, the regulator said on Tuesday. Ofcom hopes that a reduction in wholesale price will be passed on to the consumer, resulting in lower broadband costs for people in rural areas.

Ofcom has recommended that BT cuts prices in areas of the UK where there is no competition to its wholesale broadband services (pictured above in blue). Photo credit: Ofcom

"This could benefit nearly 12 percent of UK households or around 3 million homes and businesses," said Ofcom in a statement. "These are mostly in rural areas including parts of Scotland, Wales and Northern Ireland as well as the south west of England, Norfolk, Yorkshire, Cumbria, Northumberland and other areas."

Ofcom said that 78 percent of households — mainly in densely populated or urban areas — now have effective competition as a result of Local Loop Unbundling (LLU), which is the practice of allowing multiple providers to share telecoms infrastructure.

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The proposed charge controls would not affect areas where there is competition between wholesale broadband suppliers.

Imposing the controls would narrow the gap between the cost of broadband in rural and urban areas, which exists because of a lack of Local Loop Unbundling (LLU) options and a higher cost of service delivery in more remote areas, Ofcom said.

"A healthy and competitive mix of service providers will ensure that UK broadband users are brought the highest quality and range of services possible, while paying fair and reasonable prices," Tony Jackson, director of telecoms solutions at Convergys, told ZDNet UK on Thursday. "We believe that communication service providers can seize this opportunity to provide the UK's broadband users with a wide range of offerings and service bundles."

Broadband access

To encourage BT to invest more heavily in ADSL 2+ — which is capable of delivering up to 24Mbps connections over a copper network — Ofcom has proposed that these services are exempt from the new charge controls.

Ofcom's proposal comes as part of its pledge to review wholesale broadband access markets, made in December 2010. The regulator expects to give a final statement on the review during the summer, after which the new charge controls will come into effect.

In July 2010, Ofcom ruled that BT should not be able to raise its wholesale prices to account for pension payments.

In January BT announced the six market town winners of its Race to Infinity competition, which aimed to increase awareness of the company's rollout of its fibre-to-the-cabinet (FTTC) products. On 13 January it also named 41 more market towns that would be fibre enabled in the future.

BT had not responded to a request for comment at the time of writing.

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