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Unbundled Review Could Raise Broadband Prices

Posted: 07th Feb, 2008 By: MarkJ
BT has reportedly warned Ofcom that its Openreach division, which was created to ensure fair access to its network for all operators, is not making the 10% regulatory return on investment that was promised.

The situation could result in some unbundled ISPs being forced to raise their monthly broadband prices by an additional £3!:

A BT spokesman said: “It is important that the company has clarity on how we can hit the 10 per cent return. How exactly that is achieved, we would need to sit round the table with Ofcom and establish.”

Ofcom said in a statement that it was “aware of BT's concerns with respect to revenue and profit level in the future” and had agreed to an informal review to weigh up whether BT had a case. Any resulting formal review would take place this year, it said. Analysts belive that a review could involve BT charging rivals anything up to an additional £3 per fully unbundled line per month. At present a fully unbundled line costs £6.67.

The Times correctly notes that many unbundled providers, such as Tiscali and TalkTalk, would not be able to absorb an increase that large due to slim profit margins. The result could cause a major market shift, with some of the largest providers being forced to raise prices.

In related news it’s emerged that some customers, which have been moved onto a fully unbundled line (does not apply to shared LLU lines) by their ISP, often without being informed, can be forced to stump up £125 if they want to change ISP. The Register reports:

Ofcom told us: "Ofcom is working with Openreach, BT Retail and other communications providers to identify the reasons for this and to identify a solution as soon as possible."

BT blames the situation on its IT system. It said: "For most customers there is no problem coming back to BT and it shouldn’t cost them anything. Where a working line exists our intention is that reconnection should be free - but a charge of £125 applies where we have to involve an engineer.

In a small minority of situations such as where a customer is returning to join BT from a Local Loop Unbundled competitor, our systems default to charging £125. We do intend to change this as soon as possible. It is one of a number of complex changes arising from BT Retail's adoption of a new IT system to comply with its commitment to the regulator, Ofcom.

Ofcom is busy investigating both situations, although we can see the first one causing a major upset among BT’s unbundled line using rivals and their customers. We expect to hear a lot more about this over the coming weeks and months.
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