Ofcom forces Openreach to lower broadband wholesale prices

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The proposed rules will have prices slashed every year until 2020/21

Ofcom is demanding Opennreach lower its wholesale prices to broadband providers in a move to protect customers from higher prices.

The regulatory body will propose measures to BT’s infrastructure arm, Openreach, to control what it can charge providers for its fibre broadband service.

Ofcom is hoping with the measures, prices for fibre broadband could be slashed for millions of customers in the UK.

Under the new rules Openreach’s price for 40Mbit/second broadband would fall from £88.80 per year to £66.28 next year and £52.77 by 2020.

Ofcom said in a statement: “We would expect much of this reduction to be passed through by retail providers to their customers, resulting in lower bills.”

However, prices for even faster broadband will not be capped, in the hope that operators will be spurred to install their own lines in competition with Openreach.

Other rules force Openreach to complete 93 per cent fault repairs within two working days, a rise from the current 80 per cent. Openreach will also have to install 95 per cent of connections on the agreed date, an increase from 90 per cent currently.

BT was fined a record £42 million by Ofcom on Monday due to delays by Openreach in installing fibre lines.

Ofcom competition group director Jonathan Oxley said: “Our plans are designed to encourage long-term investment in future ultrafast, full-fibre networks, while promoting competition and protecting consumers from high prices”.

Under fire

The telecoms giant came under scrutiny when a £530 million black hole was discovered in its Italian arm, wiping a fifth of its market value in January.

CCS Insight principal analyst Kester Mann said the latest Ofcom proposal is another challenge for the “under-fire BT” to rise to, or face full separation from Openreach if performances do not improve.

“It also again reinforces the regulator’s determination to maintain a competitive UK retail broadband market and stimulate further investment. The news is likely to be welcomed by Openreach customers such as Sky, which have long campaigned for better access and end consumers, which could see a reduction in their bills,” said Mann.

“Tougher new targets for Openreach to fix faults and more quickly install new lines indicate that BT remains firmly on Ofcom’s radar. The threat of a full structural separation remains if BT cannot improve performance.”

Reward risks

Openreach disagrees with Ofcom’s view that the new rules will incentivise more investment into full fibre networks. A spokesman said: “We will be reviewing these in detail, but on first viewing they do not appear to incentivise more investment in ‘full fibre’ networks.”

“The UK needs a regulatory framework that encourages investment and rewards risk. Building digital infrastructure is very expensive with long payback periods and we won’t recover our more than £3 billion investment in fibre until after this charge control period.

“We want to invest in more ‘full fibre’ infrastructure, and we’ll be consulting with our CP (customer premises) customers to develop new business models and support to achieve that.

“Improving service is our number one priority and while we have been making great strides over the last year, we are determined to go even further in meeting our customers’ rising expectations.”

 

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