Ofcom, the telecoms regulator, is attempting to cut the cost of wholesale prices which could result in cheaper telephone and broadband services.
Ofcom has proposed amendments to the list of prices that Openreach can charge other telecom providers for using its facilities. Openreach manages BT’s network and Ofcom wants to reduce the wholesale cost of telecoms and broadband. It’s thought that some wholesale charges could be cut by as much as 10% each year.
The main beneficiaries of the move will be telecom suppliers such as Talk Talk and Sky. Virgin Media won’t benefit because it has its own cable network.
BT competitors access the BT network in two ways. The first is via Local Loop Unbundling and the second is Wholesale Line Rental.
Local Loop Unbundling enables telecoms companies to put their equipment in BT exchanges and actually take over customer lines. With the new Ofcom changes it’s hoped the amount charged by Openreach will drop by between 1.2 and 4.2% each year. Ofcom wants shared lines to fall in price by between 11.6 and 14.6% each year. This could benefit around 7.5 million unbundled lines.
Wholesale Line Rental (WLR) is where a telecom provider rents lines from Openreach rather than taking over the line completely. Ofcom wants to reduce these prices by between 3.1 and 6.1% each year which should benefit around 6.14 million WLR lines in the UK.
In a statement Ofcom said “Ofcom expects its proposed prices to lead to real term price reductions for consumers, as communications providers pass on their savings to their landline and broadband customers”.
BT’s response to Ofcom’s announcement was that they were encouraged by Ofcom’s acknowledgment of the fact that BT invests heavily in communications infrastructure but said it “would question some of the underlying assumptions being used”.
In a statement BT said “BT invests more than any other company in the UK’s communications infrastructure, so it is critical that it is able to achieve a fair rate of return in order to continue its investment in copper and fibre-based services”.
Ofcom’s proposals are part of a consultation process which will end on the 9 June and conclusions will be published in the autumn.