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UPD UK ISPs Welcome Ofcom UK Cut of BT Wholesale Broadband Prices to Rural Areas

Posted: 21st Jul, 2011 By: MarkJ
uk internet opinionsInternet providers across the country have today given a warm welcome to yesterdays news that Ofcom UK, the communications regulator, has ordered BT Group to cut its wholesale broadband charges by 12% below inflation in rural (Market 1) areas (full details).

An ISPA Spokesperson said:

"Many ISPA members already offer broadband to rural areas in innovative ways, however, ISPA believes that the increase in competition will encourage further investment and encourage the take-up of rural broadband.

Whilst costs are reducing in rural areas there are additional costs being placed on ISPs by regulation which could potentially cancel out these savings for ISPA members."

A BT Retail Spokesperson said:

"Unlike many ISPs, BT Retail already serves customers in rural areas and has never charged higher prices for consumer broadband there than in urban areas, despite the higher costs involved. We have no plans to change that.

Like all ISPs, we will be considering ways in which to continue providing our broadband customers with the best possible value for money."

A BT Wholesale Spokesperson added:

"This outcome is in line with the proposals that were widely reported on earlier this year. The impact on BT Wholesale will be non-material."

Simon Harper, Head of Marketing at Eclipse Internet UK, said:

"It’s fantastic that Ofcom has moved to assist the growth of broadband provision in rural areas. Demand for reliable broadband services continues to be strong across the UK with rural areas in particular looking to get competitive connectivity.

Businesses in rural or less densely populated areas can struggle to attain their full productivity potential when hampered by poor connections and slow speeds. With the increasing take up of web-based applications, rural broadband roll out is essential to ensure businesses in these areas have the tools to compete."

A Sky Broadband Spokesperson said:

"Lower wholesale costs are good news for customers who will benefit from more choice, value and innovation in some rural areas not covered by the Sky Broadband network."

A PlusNet Spokesperson said:

"Plusnet welcomes a move which will ultimately reduce the cost of broadband for UK customers. We currently offer value broadband from just £6.49 a month to 78% of households in the UK and we are committed to bringing great value broadband to households across the UK; we promise that our headline rates will not be beaten on price across the UK on standalone broadband."

Comment from Piers Daniell, MD, Fluidata UK:

"The issue in rural areas is the performance of the service delivered rather than the price. With prices being driven down over the past few years, the cost of broadband across the country is relatively low and, for consumers at least, there is quite a bit of choice between carriers. The issue that Ofcom is missing, and which then hampers take-up in rural areas, is speed, or where the promise of speed is made and broken. Paying a cost for a service which can achieve one speed in a town and then the same product in a rural community that is lucky to achieve half of that speed doesn't mean the user wants less cost (but a 10% reduction doesn't compensate for half the performance) they just want what they paid for. There are very few national players in the rural areas with their own technology other than BT so actually are we solving the fundamental issue with rural broadband with this reduction?"

Most of the ISPs above were keen to welcome the move, although we note that none have offered a clear commitment to pass such savings onto consumers. Admittedly most will only see a marginal benefit from the move as Market 1 users typically represent just 11.7% of UK premises.

The new charge controls will come into effect by mid-August 2011 and should last until 31st March 2014, though many consumers fear that the reductions will not be reflected in their subscription prices.

UPDATE 1:19pm

Added an extra bit to the ISPA's comment by request and also added a statement from Entanet.

An Entanet spokesperson said:

"The principle of greater competitiveness in all market areas is healthy but we'll have to wait and see what BT's reaction is to Ofcom's requirement and how it actually translates in pricing terms. Nonetheless, Ofcom seems a little over optimistic in its expectation that the move will result in ISPs providing more bandwidth for the same price.

ISPs are under increasing upward pressure on their costs even without the impending requirements of the DEA and now the UK government's plans for the introduction of the Communications Capabilities Development Programme."

UPDATE 22nd July 2011

Added a comment from business ISP Fluidata above.
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