Apparently raising the price cap that limits how much Openreach can charge will increase the amount of competition in the market and allow Openreach the money to invest in delivering services.
The basic framework of price changes is laid out below:
|Type of telephone line||Current annual price cap||Proprosed cap from 2009/2010|
|Fully unbundled line (MPF)||£81.69||£85 to £91|
|Shared unbundled line (SMPF)||£15.60||£15.60 to £16.20|
|Residential wholesale line (WLR)||£100.68||£100.68 to £104.40|
|Business wholesale line||£110||£106.00 to £110|
Fortunately these prices are not set in stone just yet, there is a consultation period that will close on 20th February 2009 where interested parties can submit comments on the proprosal to Ofcom.
The price rises if they occur represent a rise from £8.39 (excluding VAT) a month to £8.70 a month for a telephone line from the many companies now able to provide billing for telephone line rental. The rise in rental for a shared LLU line, as used by Sky, O2 and others is fairly minimal, but TalkTalk may feel the squeeze with a possible rise of 76p per month and have no option but to pass on the price rise.
The basic idea for allowing Openreach to increase its pricing is to ensure Openreach has the funds to maintain the copper telephone network, and just maybe put some aside for future enhancements such as the fibre dream that many are doubting. If the price rises are used to simply prop up the BT share price, or make Openreach look more attractive for a sell-off the reaction will be very negative from many quarters.
Reuters has some comments from Openreach and Ofcom which reveal the price changes are likely to take effect from April 2009, and Ofcom seems to think that firms may absorb the price rises. We believe it unlikely in the current economic turmoil that retailers will accept a further reduction in profit levels, a lot will depend on what sort of income they receive from the chargeable calls in the telephone packages.