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UPD Ofcom Calls for BT to Cut its UK Wholesale Broadband and Phone Line Prices

Posted: 06th Feb, 2012 By: MarkJ
bt openreach logoofcomThe communications regulator, Ofcom UK, has notified the European Commission (EC) of its intention to impose a new round of price cuts ("charge controls") upon BTOpenreach's (BT's wholesale access division) telephone and broadband lines. This includes both BT's own Wholesale Line Rental (WLR) services and rival Local Loop Unbundling ( LLU ) lines, such as those provided by Sky Broadband , TalkTalk and Be Broadband .

Under the revised European Framework, which was added into UK law during May 2011, Ofcom is required to submit charge control proposals to the European Commission (EC) for their review. Prior to this Ofcom would have consulted with UK stakeholders and the EU at the same time. Instead the regulator is now required to consult the EU after having undertaken a UK consultation.
Ofcom's Proposed Line Rental Charge Control Changes

* A fully unbundled line to a property - where a communications provider takes over the line to provide broadband and telephone services.

The price currently charged by Openreach is £91.50. Under Ofcom’s draft decision this will be set to £87.41 for financial year 2012/13 and decrease further in the next year in accordance with the formula RPI -5.9%.

* A shared unbundled line to a property - where a communications provider uses a proportion of the line only for the provision of broadband.

The wholesale price today is £14.70 per year. Under Ofcom’s draft decision this will be set to £11.92 for financial year 2012/13 and decrease further in the next year in accordance with the formula RPI -15.9%.

* Wholesale line rental - used by communications providers to offer telephone services to consumers using lines rented from Openreach.

The price today is £103.68 per year. Under Ofcom’s draft decision this will be set to £98.81 for financial year 2012/13 and decrease further in the next year in accordance with the formula RPI -7.3%.
Ofcom explains that in 2010 BT undertook a review of the valuation of its duct network, which resulted in the value of its duct network being "significantly increased". The regulator said that this did "not represent a reliable estimate" and instead decided to estimate the value of their post August 1997 duct through an RPI indexation of BT duct expenditure since August 1997. A final decision is due in early March 2012.

Overall the changes do not represent a significant reduction in price and thus most of the reductions are unlikely to be passed onto consumers, although some ISPs might attempt to do so. Meanwhile BT looks set to oppose the change and has said that they, "disagree with some of the underlying assumptions that [Ofcom] have used to determine these charge controls".
Ofcom's Feb 2012 Charge Control Review (LLU and WLR Services)
http://stakeholders.ofcom.org.uk/consultations/llu-wlr-further-consultation/statement
UPDATE 8th February 2012

Added a small statement from BT at the bottom. It should also be noted that Ofcom's first proposed prices have a habit of changing before they come into effect.
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