UPD Ofcom UK Makes BT Cut its Wholesale Broadband and Phone Line Prices

As widely expected the UK communications regulator, Ofcom, has today introduced a new round of price cuts (“charge controls“) upon BTOpenreach’s national telephone and broadband lines, which affects services delivered via both BT’s own Wholesale Line Rental (WLR) and rival Local Loop Unbundling ( LLU ) lines. As a result ISPs like Sky Broadband , TalkTalk and Be Broadband should now pay a little less. But will consumers see any benefit?

Last month (here) Ofcom explained that BT undertook a review of the valuation of its duct network in 2010, which resulted in the value of this network being “significantly increased“. The regulator said that BT’s valuation did “not represent a reliable estimate” and instead decided to adjust the value of their post August 1997 duct through an RPI indexation of BT duct expenditure since August 1997. Today’s final prices have now been approved and remain unchanged from the February 2012 notice.

* A fully unbundled line to a property – where a communications provider takes over the line to provide broadband and telephone services.

The price currently charged by Openreach is £91.50. Under Ofcom’s decision this will be set to £87.41 for financial year 2012/13 and decrease further in the next year in accordance with the formula RPI -5.9%.

* A shared unbundled line to a property – where a communications provider uses a proportion of the line only for the provision of broadband.

The wholesale price today is £14.70 per year. Under Ofcom’s decision this will be set to £11.92 for financial year 2012/13 and decrease further in the next year in accordance with the formula RPI -15.9%.

* Wholesale line rental – used by communications providers to offer telephone services to consumers using lines rented from Openreach.

The price today is £103.68 per year. Under Ofcom’s decision this will be set to £98.81 for financial year 2012/13 and decrease further in the next year in accordance with the formula RPI -7.3%.

BT has said that they “disagree with some of [Ofcom’s] underlying assumptions“, although this will not stop the new prices from officially coming into effect on 1st April 2012. The question now is whether or not any broadband ISPs will pass these reductions onto consumers.

Overall the changes do not represent a significant shift and, given the weight of new regulations being imposed upon the internet industry and rising data demands, ISPs might well be inclined to absorb any savings to help cover other costs. At the same time BT has a knack for raising prices in other areas to compensate for such falls.

Ofcom’s Charge Control Review for LLU and WLR Services (PDF)
http://stakeholders.ofcom.org.uk/consultations/wlr-cc-2011/statement-march2012/

UPDATE 12:34pm

Consumer affairs group Consumer Focus has sent us a comment.

Adam Scorer, Director of Policy and External Affairs for Consumer Focus, said:

“Talk should be cheaper for consumers from April, as the cost of their landlines and broadband will fall as a result of these moves by Ofcom. Lower wholesale charges should mean telecoms providers compete to bring down the cost of calls and provide cheaper broadband packages. At a time when everything seems to be going up, it is nice to see some action to put a few extra pounds back into consumers’ pockets.”