Ofcom Tweak Final Pricing for Openreach 40Mbps FTTC Broadband

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.).

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 fibre” FTTH/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