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UPDATE EU Rules Could Allow Ofcom to Remove BT’s Broadband Price Caps

Wednesday, September 17th, 2014 (3:39 pm) - Score 833

Ofcom’s carefully crafted control of the United Kingdom’s market for broadband and phone services might face a challenge next month. A leaked proposal suggests that the EU’s new rules, which are designed to foster a Single Telecoms Market, could seek to remove some of the charge controls on BT’s services.

According to Reuters, telecoms operators might be able to compensate for the expected abolishment of mobile roaming charges and tougher Net Neutrality rules by allowing national regulators, such as Ofcom in the UK, to remove some of the price caps that they place on broadband services from incumbent network operators like BT (Openreach); specifically this refers to the services that BT sells on to rivals, such as TalkTalk and Sky Broadband.

ISPs like TalkTalk and Sky see such controls as vital for helping them to compete, at an affordable level, in a market where BT effectively owns and controls the underlying infrastructure. But incumbents like BT have long complained that this hurts their revenues and gives them less money with which to reinvest into the deployment of new technologies.

However the Body of European Regulators of Electronic Communications, which represents national EU telecoms regulators including Ofcom, tends to side with alternative operators and believes that it would be wrong to lift such restrictions. Ofcom’s recent Fixed Access Market Review (FAMR) made some adjustments to balance related limits and charges, but still resolved to maintain many of their existing measures. The European Competitive Telecommunication Association (ECTA), of which TalkTalk is a member, unsurprisingly agrees.

Erszébet Fitori, Director of ECTA, said in July 2014:

Premature de-regulation represents a step back in the liberalisation process. Regulation is there to ensure that those markets which are structurally uncompetitive receive the right push towards competition. Forcing the removal of regulation prematurely will drive competitors out of the market, raise prices for users, stifle innovation and take away hard won benefits from European consumers.”

But the new rules, if adopted by the European Commission (EC), would still need to be approved by EU governments and flexibility will surely exist that would allow Ofcom’s existing approach to be maintained. Hopefully all will become clear once the text is made public.

UPDATE 18th September 2014

It’s been suggested to ISPreview.co.uk by industry figures that the Reuters article is likely to be quite wide of the mark and indeed we’re inclined to agree. The regulator probably still expects to be setting charge controls going forward, much as it has been doing for some considerable time. In short, we don’t expect a significant change to the current approach, at least not in the UK.

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Mark Jackson
By Mark Jackson
Mark is a professional technology writer, IT consultant and computer engineer from Dorset (England), he also founded ISPreview in 1999 and enjoys analysing the latest telecoms and broadband developments. Find me on Twitter, , Facebook and Linkedin.
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1 Response
  1. Avatar Steve Jones says:

    The only way I could see this being accepted is if any extra money was re-invested. For instance, it’s possible to imagine a “copper loop” surcharge being used to finance FTTH. Indeed, this approach has been talked about be various academics as a way of facilitating fibre rollout. The problem is that FTTH is in competition with a copper network which is largely a sunk cost (in investment terms) which makes it cheap. (I know line rentals have been going up, but that’s a strictly retail phenomena whereby ISPs are using line-rental to cross-subsidise broadband to allow them to advertise low headline prices, something that the ASA ought to look at. Wholesale LLU prices actually reduced, especially when inflation is taken into account).

    Of course any such exercise would have to be policed very carefully indeed and would likely require primary legislation as well as EU-approval.

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