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Ofcom UK Proposes Higher BT Broadband Line Price Rises

Posted: 22nd May, 2009 By: MarkJ
Ofcom has today proposed that BT be allowed to increase the price it charges for some of its wholesale telephone and broadband line services, most specifically its unbundled ( LLU ) products. However, BT has reacted angrily to the proposals, warning that they are still too low and will not allow the operator to fully recover its costs.

Back in 2006 Ofcom set the maximum prices that BT Openreach, which is responsible for ensuring that all rival ISPs have equality of access to BT's local network, could charge for its wholesale services. The idea was to make sure that BT got a good (10%) return on its investment while allowing rivals to install their own kit in the incumbents telephone exchanges ( local loop unbundling - LLU ).

Unfortunately the regulator failed to include annual adjustments for inflation and other costs, which caused BT to issue a formal complaint about the matter last year (original news). Ofcom agreed with BT's grievance and began a consultation, the results of which we are seeing today.

So what's changed? The new price rises will mainly affect fully unbundled (MPF) lines, where an ISP takes over the line to provide broadband and telephone services (e.g. TalkTalk). Prices for these will rise from £81.69 to £86.40 for 2009 and increase by around 5.5% + Retail Price Index (RPI) in 2010. By comparison shared unbundled lines (SMPF), such as those provided via parts of Tiscali's network, will only see a minor increase of 1% + RPI, which will not create a noticeable change in 2009.

bt openreach llu price rise

Similarly ancillary and co-mingling services will also see a 3% rise in 2009 and then RPI +4.5% from 1st April 2010. This is harder to explain and is somewhat dependent on how an individual ISP organises its business model and platform.

Ofcom Chief Executive Ed Richards said: 'The new prices will enable Openreach to earn a fair return whilst allowing continued strong consumer take-up of broadband at competitive prices.'

BT is now free to implement the changes 28 days from today, though the implementation of any new individual charge will still require 90 days notification. In other words, it will be a little while before unbundled ISPs are hit by the increases, which may cause a slight rise in consumer broadband prices; it's unlikely they would all be able to absorb such an increase.

Meanwhile BT does not believe that the changes will be enough and views them as insufficient. It also fears that such low pricing could create a disincentive for future investment. Typically cheaper unbundled broadband services have also been eating into its own BT Wholesale base products, the pricing of which is currently the subject of a separate Ofcom review.
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