Softer Blow for BT as Ofcom UK Revise its Wholesale Broadband Price Cuts

The UK telecoms regulator has today issued a correction to its original July 2013 proposal (here) that would force BT into reducing the cost of their fixed line wholesale broadband services (WLR, SMPF, MPF) to ISPs. The changes represent only a small price difference of a few pence to a few pounds but then the original proposal wasn’t huge either.

As before the prices would be set by charge controls linked to inflation (CPI – Consumer Price Index), which Ofcom believes can provide “an incentive for BT to make efficiency gains“. But the regulator found errors in its calculation of “non-pay operating costs in the Cost Model“.

On top of that it’s also had to make an adjustment to the ranges for SMPF rentals, MPF rentals and WLR rentals to reflect the “sensitivity for broadband line testing which was not reflected in the published ranges“.

Just to clarify. WLR refers to BT’s own Wholesale Line Rental product and MPF/SMPF typically references fully or shared unbundled (LLU) broadband and phone lines from ISPs like TalkTalk or Sky Broadband etc.

The adjustment has affected a whole set of different prices, for example the annual cost to an ISP of renting a fully unbundled (MPF) line is currently £84.26 +vat and Ofcom originally proposed that this should be adjusted to £83.71 (CPI-3%) but has now adjusted this in the other direction to £85.61 (CPI-0.75%). Note: the price is actually variable depending on the movement of CPI (see the document below).

Similarly the current cost of WLR is £93.27 and Ofcom initially proposed that this be tweaked downwards to £88.54 (CPI-5.0%). But today’s change means the new proposal sits at £90.66 and that a CPI-2.5% be applied. In other words nearly all of the price changes have moved upwards and that means a softer blow for BT.

As usual though the changes are so small that they’re unlikely to have a huge impact on the actual end-user price of consumer broadband and phone services.

Ofcoms Revised BT and LLU Line Prices
http://stakeholders.ofcom.org.uk/binaries/consultations/llu-wlr-cc-13/correction.pdf