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Ofcom to introduce rural broadband price controls
Thursday 20 January 2011 12:10:07 by John Hunt

Ofcom are proposing in a consultation on Wholesale Broadband Access new price controls that should be applied to what are known as 'Market 1' exchanges. These are areas where only one operator (BT) has installed equipment to provide broadband to an area, and these are commonly found in the most rural areas of the UK making up 11.7% of exchanges. No changes are being proposed to other areas that have competition from other providers through LLU or in the Hull region.

The proposals to introduce price controls follow the ending of a voluntary price agreement from BT to set a ceiling on the price of broadband in these areas, which expired on the 31st December 2010. BT have agreed not to raise prices until April but from then on, there could be uncertainty in the market as to pricing. Ofcom therefore proposes to place controls on pricing for end user broadband services. It is also being selective in what this applies to. Currently, Market 1 is served by three types of wholesale product- IPStream, DataStream and IPStream Connect, with 10%, 3% and 87% wholesale market share respectively at June 2010. No next-generation broadband (21CN) is available in these areas so Ofcom are proposing to apply these price controls to IPStream Connect only. This would offer protection to the majority of users and also provide a little incentive for broadband providers still using traditional IPStream to migrate users on to IPStream Connect.

Whilst there is potential for Market 1 exchanges to receive 21CN in the future, Ofcom believes that not applying price controls to these products, when available, would help encourage the investment in faster technologies.

Ofcom are expecting to bring in price controls based on a three year RPI-X which would require BT to reduce its charge relative to inflation each year. The range being suggested to run until 31st March 2014 are RPI-10.75% and RPI-14.75%.

A charge control model based on these proposals will be published in February. The consultation is open for comments until 31st March 2011.


Posted by krazykizza over 6 years ago
My exchange was market 1 at the time of WBC going in. I think however these pricing controls are a couple of years too late, it should of came in from phase 1.
Posted by c_j_ over 6 years ago
"IPStream, DataStream and IPStream Connect, with 10%, 3% and 87% wholesale market share respectively at June 2010."

Right. Anybody know what the penetration is of IPstream Connect outside BT Retail?
Posted by warweezil over 6 years ago
Considering the low speeds and high bandwidth charges over such old tech equipment, we should see a price CUT to reflect the poor quality of service and total lack of investment in Market One exchanges. Maybe that will persuade BTw to spend some cash on us by completing the 21cn upgrade promised here but never delivered - WBC dates withdrawn and not renewed.

Our data travels tourist class... time for the pricing to reflect that
Posted by AndrueC over 6 years ago
@warweezil:They aren't delivering you a poor service. They are delivering the best they practically can. Most of those exchanges are probably already operating at a loss. In terms of value for money M1 exchanges probably do better than M3 simply because we are paying extra to help fund you.

It's the same with all services - if you want the best you need to live within a large built up area. That's why humans invented towns and cities in the first place.

The fact you can get broadband at all is testament to the effort and expense BT has gone to.
Posted by AndrueC over 6 years ago
If/when you ever get a multi-screen cinema, large supermarket, branches for all the major banks, a leisure centre and all the other trappings of a large, populous area /then/ you can whine about your poor broadband.

Until then you'll have to accept that when there aren't many people or you live a long way out in the countryside services will inevitably suffer. Either that or you'll have to pay *more* in order to make it worthwhile providing decent services.
Posted by herdwick over 6 years ago
The Market 1 exchanges were contributing more than their fair share of revenue according to the OFCOM document. ROCE 26% in Market 1 vs 12% total WBA.
Posted by herdwick over 6 years ago
"penetration is of IPstream Connect outside BT Retail?" -

Across the whole WBA market there are 145 CPs purchasing IPS. Within Market 1, two CPs
account for approximately 15% of total IPS volume. These CPs are Principal Operators accordingly to the definition adopted in the 2010 WBA Statement. We believe that these two CPs will eventually migrate their customer base away from IPS. The remaining volumes are scattered in small blocks and are taken up by small ISPs.
53. In Market 1, other than BT, five CPs purchase IPS Connect. These are TalkTalk, Sky, Orange, Virgin Media and Entanet.
Posted by dragon1945 over 6 years ago
BT will still only offer me 512 kbps. Homecall gave me 1.5 MB. Talktalk manages 1.8 MB. For a whole heady week I actually got 2 MB. Homecall and Talktalk have installed boosters in the local exchange. BT hasn't. No surprises there then. TT and Homecall prove that 512 kbps is not the limit I can receive despite BT's insistance that this was the maximum possible on my line. Needless to say I don't think BT has many customers round here since my grandson told everyone he knows that his gran gets a much better connection elsewhere, and at a lower price.
Posted by hefilump over 6 years ago
@andrueC. Typical comment of someone who lives in a town and has all the services they need right at hand.

I notice that one of the items you identified as defining the "trappings of a large, populous area" was a large supermarket.

Fat lot of good that would be if those of us who live and work in the country producing the food for you to buy in this supermarket all up sticks and moved into town.

Perhaps you should think about that before you open your mouth.
Posted by hefilump over 6 years ago
What BT should be doing is getting everyone to a standard and then making things better, rather than take the easy option.

In the same way that we pay council tax at the same rate as those of you in town but have no access to the benefits, we pay the same price for broadband but don't receive the speed.

I would willingly pay more for a better service but BT will not give you that option.
Posted by c_j_ over 6 years ago
"In Market 1, other than BT, five CPs purchase IPS Connect. These are TalkTalk, Sky, Orange, Virgin Media and Entanet. "

Thanks. So the IPS Connect customers are (with one exception) the big boys. The rest have stuck with IPstream.

"Ofcom are proposing to apply these price controls to IPStream Connect only"

Leaving all the "smaller" ISPs on wholesale services with unregulated prices? I wonder which way they'll move.

Nice one, Ofcon. As always.
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