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Ofcom UK Finalises New Broadband ISP Market Definitions and Pricing

Posted: 03rd Dec, 2010 By: MarkJ
uk map broadband market definitionsofcomThe UK communications regulator has today published its final Wholesale Broadband Access (WBA) market review conclusions. Ofcom found that there was effective competition in almost 80% of the country's broadband market, but has proposed new price controls for areas where this is not the case. The move could impact how much you pay for broadband.

At present Ofcom classifies different parts of the country based upon the amount of competition from Principal Operators (PO) / ISPs in any given area (i.e. Market 1, Market 2 and Market 3). Market 3 areas are typically home to 4 or more providers and thus have the lowest prices due to de-regulation, while Market 1 is essentially the opposite and services are only available from BT Wholesale.
Current Broadband Market Definitions
* The Hull area: (0.7% of UK premises);

* Market 1: exchanges where only BT is present (14.2% of premises);

* Market 2: exchanges where two or three POs are present or forecast (13.8% of premises); and

* Market 3: exchanges where four or more POs are present or forecast (71.3% of premises).
However the market has changed since Ofcom's original definition was first introduced. For example, Orange's unbundled ( LLU ) broadband platform is now controlled by BT and other operators have since extended their LLU coverage.

The European Commission (EC) also complained that any definition based primarily on the number of ISPs present was not, in itself, sufficiently good enough. As a result Ofcom had to put forward new proposals in its August 2010 consultation (here), which now appear to have been accepted.
New Broadband Market Definitions
* The Hull Area: (0.7 per cent of UK premises);

* Market 1: exchanges where only BT is present (11.7% of premises);

* Market 2: exchanges where two ISPs are present or forecast and exchanges where three ISPs are present or forecast, but where BT’s share is greater than or equal to 50% (10% of premises);

* Market 3: exchanges where four or more ISPs are present or forecast and exchanges where three POs are present or forecast, but where BT’s share is less than 50% (77.6% of premises).
Ofcom has also factored in the development of "super-fast" Next Generation Access (NGA) broadband services into its analysis. They concluded that, at this stage, both current and next generation broadband services should be in the same market. However this could change in the future.

Some ISPs, such as PlusNet UK, already make use of Ofcom's market definitions as a means of charging certain BT covered areas more (Market 1) for the same service than others (Market 2/3). However most ISPs prefer to simplify their pricing by charging everybody the same amount, with the exception of LLU ISPs that always charge more if you're outside of their coverage.

As it stands the new definitions probably won't affect the prices that most ISPs currently charge, at least not by any significant margin. Ofcom now aims to consult on their proposed changes, for a third time no less, by the end of the year.
Ofcom's WBA Statement
http://stakeholders.ofcom.org.uk/consultations/wba/wba-statement/
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