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Ofcom mulls BT Openreach price hike

'Free' broadband economics tested

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After months of lobbying, BT has got its wish. Ofcom today announced it will formally consider letting Openreach raise the prices it charges BT's competitors for wholesale access to local exchanges.

BT has been crying foul over Openreach because its costs have increased alongside greater competition in broadband from local loop unbundlers.

Firms which offer "free" broadband under very tight economics based on the current charges will likely squeal the loudest about any resulting rises in wholesale line rental for unbundled lines. Their economics relies heavily savings made by unbundling.

They will be able to point to Ofcom's own assessment of the level of service offered by Openreach: it's not very good.

Ofcom said in a statement: "The evidence we have reviewed to date suggests that there is likely to be a case for some increases in the charges for the regulated access services.

"However, we do not currently believe that the increases need to be as significant as is implied by the projections provided by BT."

It'll review the current price ceilings in two phases. The first consultation, beginning today, will aim to set out the current costs of Openreach and expected changes, and examine the effect raising charges will have on BT's competitors.

A second consultation will address the pounds and pence nitty-gritty. Ofcom expects to have a new deal thrashed out by the end of this year.

Openreach set up shop in January 2006, after BT cut a deal with regulators to avoid an enforced full scale dismantling of its network ownership and the services other BT divisions use it for. The "functional separation" model that emerged is being pressed on other nation's regulators by the European Commission. ®

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