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BT: Ofcom's planned wholesale price cap? Just a smidge too tight

Watchdog wants broadband, landline charges constricted to help competition

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BT should slash its wholesale prices for competitors that access the former national telco's copper network, comms regulator Ofcom said today.

Operators such as BSkyB and TalkTalk could then pass on those "real-terms" cost cuts to their customers, the watchdog added.

Ofcom is proposing that BT's Openreach biz, which is subject to regulation due to its "significant market power", should reduce its wholesale charges on some of its products.

It said that a fully unbundled line to homes and businesses in the UK that allows BT rivals to offer customers telephone and standard broadband services should have its prices cut.

Operators currently pay £84.26 per year for each connection, but the watchdog is proposing that the charge should drop between 0 per cent and 6 per cent below the rate of inflation from 2014 to 2017.

Ofcom added that charges for other parts of Openreach's offerings to its competitors should also be reduced.

It wants to see shared unbundled lines slashed from the current annual price of £9.75 by as much as 12 per cent below inflation every year.

The regulator added that the cost of wholesale line rental, which currently carries a £93.27 price tag per year, should be cut by up to 8 per cent below inflation for rival providers accessing BT's copper network.

But BT will not face price caps across all its wholesale offerings. Ofcom explained:

Since the last such review in 2010, competition has spread to more rural areas as communications providers have rolled out their own networks, based on unbundling BT’s lines, to smaller telephone exchanges.

Ofcom has found that the area of the UK with effective competition has grown in the last three years from 78 per cent to 90 per cent. Ofcom is proposing no regulation in this competitive area, but to impose regulation including a charge control on BT’s services in the less competitive remaining 10 per cent of the UK.

BT, however, disputes Ofcom's sums. A company spokesman said: "These proposals are complex and we will review them in depth. There are a number of areas where we believe Ofcom have not fully recognised the costs of providing services."

The regulator said its consultation process on the BT's wholesale pricing structure would close on 25 September with a final decision about those costs not expected until next spring. ®

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