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Ofcom Tweak Final Pricing for Openreach 40Mbps FTTC Broadband

Wednesday, March 28th, 2018 (8:46 am) - Score 5,730

Ofcom has today published a final statement on their recent UK Wholesale Local Access Market Review (WLAMR), which is broadly unchanged from last month’s major announcement (here) but there has been a tweak to wholesale FTTC “fibre broadband” pricing for UK ISPs.

The 2017/18 WLA review sets out a variety of new charge controls, quality standards (installs, repair times etc.) and physical infrastructure access requirements for Openreach (BT). We don’t intend today to repeat everything we wrote in February (see above link) since the final statement is almost identical, except for the fact that the European Commission has now confirmed the changes and chose to make no comment on them.

However Ofcom has made a few smaller tweaks to an area that could have an impact on a large number of consumers, which we feel should be reflected. This concerns the regulator’s controversial decision to slash the wholesale price of Openreach’s up to 40Mbps (10Mbps) upload tier for their “superfast broadband” class Fibre-to-the-Cabinet (FTTC / VDSL2) product.

Originally the wholesale (ex. vat) price for this GEA 40/10 tier – one of the most popular packages purchased by UK consumers – was set to fall from £88.80 per year today to just £59.04 by 2021. Since then Ofcom has increased the pricing for its final statement in order to “reflect new information, particularly in relation to inflation and BT’s pension costs.” As a result the price in 2021 will now fall to £59.91 instead of £59.01.

In the image below we’ve also included the change of cost for a fully unbundled (MPF) copper line (line rental), which is typically part of most FTTC broadband and phone packages. Remember that wholesale costs like this exclude all the extras that ISPs have to add on top (a profit margin, 20% VAT, capacity, services / network etc.).

fttc_and_mpf_llu_prices_april_2018_wholesale_uk_openreach

In the regulator’s view this change should “help BT’s rivals to compete for customers, while several build out their own full-fibre networks,” which is partly true. Internet providers like TalkTalk, Sky Broadband and other ISPs will no doubt rejoice and it will help to fuel stronger uptake, which is also good for the Government’s Broadband Delivery UK programme (i.e. clawback linked reinvestment of public funding to boost coverage).

On top of that the price cut could also help to take some of the sting out of any price increases that might result from the new 10Mbps USO (see today’s other news), which will impose an as yet unspecified levy upon the ISP industry in order to help cover its implementation costs. FTTC could play a big role in meeting the USO.

On the other hand Ofcom runs the risk of making slower FTTC so cheap that it could discourage investment in new / ultrafast networks, which might struggle to compete against the extremely low pricing of FTTC. Lest we forget that both the Government and Ofcom are currently very keen to encourage more coverage of “full fibreFTTH/P broadband (example), especially via alternative networks.

A similar situation already exists in today’s market. Just under half of the broadband lines in the UK are still based off slower copper ADSL based lines and that’s at least partly because they’re so cheap and not everybody sees a need for the faster services (FTTC, HFC DOCSIS, FTTP etc.), which tend to attractive a higher monthly premium.

Ofcom’s Final 2018 WLAMR Statements
https://www.ofcom.org.uk/../wholesale-local-access-market-review

https://www.ofcom.org.uk/../quality-of-service

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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.
Leave a Comment
11 Responses
  1. chrisp says:

    When will they set the price of FTTP?

    no doubt they’ll pitch it as not much more than FTTP and wonder why no one would be providing it.

    1. Mark Jackson says:

      FTTP and G.fast are not having their prices regulated yet since neither has developed significant market coverage. I don’t expect that to change on FTTP for a very long time and the growing competition could even make it unnecessary.

    2. Joe says:

      “I don’t expect that to change on FTTP for a very long time and the growing competition could even make it unnecessary.”

      Unnecessary perhaps but that doesn’t mean it won’t happen. Regulators just can’t help themselves. I find they idea they will resist implausible – after all if the market can function without them then they won’t need so many staff and that can’t be allowed to happen.

    3. GNewton says:

      While Ofcom may indeed have failed to do a proper job as a regulator it is also true that the market has failed to deliver fibre networks for a long time. BT has now missed the train with regards to widespread fibre deployment. Vodafone, Hyperoptic, Gigaclear, and others still have a good chance to grab some decent market shares.

    4. Joe says:

      @GNewton

      But did the market fail or did the regulatory framework stop the market succeeding.

    5. occasionally factual says:

      Given BT Retail, Plusnet (Both BT plc) and Zen set the same price for FTTC and FTTP for the 80Mbps and under categories, the market is kind of self regulating. At this moment.

    6. JamesMJohnson says:

      I was under the impression that there were Market bands for each exchange (dependant on available suppliers from it) and those bands had market/price regulations (may have changed now). Surely a residence with native FTTP should should be treated the same way as they don’t have a copper phone line and are effectively locked in to a limited choice of suppliers.
      Not that I want it to… there’s a greater incentive for them to continue rolling out FTTP/GFast whilst there’s less regulation.
      I don’t want to pay 30K or whatever for a run of 20m fibre to the splitter (yes I live on an estate, half served by native FTTP and the other half FTTC… the native FTTP duck is 3m from my door)

  2. Skyrocket says:

    Why isn’t Ofcom do something for FTTC 80/20?

  3. Stephen Wakeman says:

    @Joe

    You posit a rhetorical question that is non sequitur as GNewton was not suggesting a market failure or a framework failure, just a failure of a regulator in discharging it’s duties effectively.

    Given the concern is that a majority of customers are highly price sensitive I would say the regulator has failed. If you must blame regulatory framework then it is not the broadband framework but the wider telecoms one that has failed the industry.

    Customers want cheap broadband and have been getting it, offset by the ever increasing telephone line rental prices that until recently Ofcom left unchecked.

    The result is that customers have raised on cheap broadband and do not see it as a value at this point. That is the industry’s fault for taking that pricing route and Ofcom’s fault for letting them charge ridiculous money for a phone line that’s not used in many cases just to give access to the DSL product

    1. Steve Jones says:

      “offset by the ever increasing telephone line rental prices that until recently Ofcom left unchecked.”

      This is inaccurate.

      The wholesale line cost (bot MPF & WLR) has been heavily regulated by Ofcom since the inception and prices have been reduced, not just in inflation-adjusted terms, but even without that. If you are referring to the retail costs of line rental, then the only controls are on voice-only lines (applied to BT Retail). Retail line price for line rental which are used on broadband are unregulated.

      Insofar as retail ISPs have shifted much of their charges onto a retail price for the line, that has nothing to do with the costs of a phone line. It’s illusory. The fact is that revenue from fixed line voice calls was part of what went to fund the whole package. Now that is in long term decline, there was bound to be some shift of charges as the incremental cost of voice provision is near zero.

    2. Joe says:

      @Stephen:

      No; GNewton stated “it is also true that the market has failed to deliver fibre networks for a long time”

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